A FIRE calculator that uses your real numbers

FIRE stands for Financial Independence, Retire Early. The idea is simple: once your investments can cover your living costs indefinitely, work becomes optional. The two questions are how much you need, and how long it will take to get there.

Your FIRE number

The usual starting point is the 4% rule. Research on historical market returns found that withdrawing about 4% of a portfolio in the first year, then adjusting for inflation, lasted at least 30 years in most periods. Turned around, that means you need about 25 times your annual spending:

FIRE number = annual spending ÷ safe withdrawal rate

If you spend $60,000 a year, that's $60,000 ÷ 0.04 = $1.5 million. Many people planning a retirement longer than 30 years use 3.5% instead, which raises the target to about 28.6 times spending.

How long it takes

Time to FIRE depends on three things: what you have now, how much you save each year, and what your investments earn after inflation. Your savings rate matters most. Saving more both grows the pot faster and, because you're living on less, lowers the target.

Why a desktop app instead of a web calculator?

Online FIRE calculators, including the one above, only know what you type in, and the numbers you guess are usually the weakest part. Most people don't know their real annual spending to within a few thousand dollars. Covely's FIRE Projection report starts from what's actually in your accounts:

• Net worth from your accounts. Your bank accounts, investments and investment properties minus your debts, converted to your base currency. Your home is left out because you can't live off it while you live in it.
• Real spending and income. Your average monthly spending and income over the last 12 months come from your transactions. Loan principal repayments are counted as transfers, not spending, so paying down debt doesn't inflate your target.
• Your actual savings rate, worked out the same way.
• Adjustable assumptions. Change the safe withdrawal rate, expected real return, or target spending if you plan to live on less or more in retirement. Reset to your actual average at any time.
• A projection chart of your net worth climbing towards the target line, and how long until you cross it.

Because it reads your data every time you open it, the projection updates as you go. A cheaper month, a pay rise or a market dip all show up without re-entering anything. Your financial picture stays on your computer, which matters when you're tracking every account you own in one place.

Get the inputs right

• Track your spending for a few months first. Your FIRE number is only as good as your spending figure. Custom reports help you see which costs will continue in retirement and which won't.
• Think about super. In Australia you generally can't access super until preservation age, currently 60, so early retirees need enough outside super to bridge the gap.
• Mind the tax. Selling investments to live on can trigger capital gains tax. See how the CGT discount works.

The FIRE Projection report is part of Covely PRO, a one-time $9.90 licence.

Related reading: how to track your net worth without the cloud.

Frequently asked questions