FIRE Calculator/ Early Retirement Calculator
Maths, maths, and maths. There is no escape. You might not like it, but it is everywhere in the world. It is in the FIRE community as well. This is why we have provided you with a way to make some of those calculations easier and make you get on to the FIRE train as soon as you can.
Early Retirement Calculator
When you are on a journey to financial independence, you will need to do various calculations, so to make them easier we have designed an early retirement calculator to make the mathematics effortless for you.
Through this calculator that we have provided, one can calculate their total financial independence amount, and the time it will take them to reach that goal.
A FIRE calculator can make your journey just a bit faster. It will also help you learn about FIRE (Financial Independence, Retire Early) as well.
What Do I Need For This?
This calculator takes in 4 inputs, which are important to help calculate the results that will lead you in the right direction of FIRE. All these 4 inputs are:
- Annual Retirement Expenses: This is the total annual expenses you expect to have in your retirement. Different FIRE methods have different types of expenses. If your goal is to achieve Fat FIRE, then your annual retirement expenses will also be higher, as you will also be accounting for the luxurious lifestyle you plan to achieve after your retirement. While through Lean FIRE, your expenses decrease only to the necessities. Deciding how much your annual retirement expenses are expected to be taken on various factors such as your current income, the lifestyle you want to live in, and your country. Use all these factors to carefully determine what you expect your expenses to be.
- Withdrawal Rate: This is the percentage you are going to be withdrawing every year, from your total FI sum. Generally, in the early retirement community, 4% is what the withdrawal rate usually is.
- Current Savings: This is the total savings you currently possess. This means all the amount that you have saved up for your retirement and all the investments that you currently have. If you are saving up for something other than early retirement, then do not include that in your total current savings.
- Annual Savings: The total amount of money that you save every year. This only includes the amount of money you save annually for your financial independence. Savings meant for other things which are not related to FIRE should not be included in this sum.
How Does It Work?
The FIRE calculator helps you by calculating your total financial independence sum and the time it will take to reach early retirement.
First, it calculates your FIRE sum by taking in your expected Annual Retirement expenses. Using that and the provided annual withdrawal rate, we can calculate the total amount of sum you would need to achieve for your retirement. (Expected Annual Retirement Expenses/Withdrawal Rate)
After calculating the total sum for FIRE, we calculate the total amount of time it will take for you to achieve that sum based on your current savings and your annual savings. We calculate that by taking in the calculated FIRE sum and subtracting your current savings from it. The result achieved is then divided by the annual savings to figure out how many years of more savings at the current rate will take you toward your FIRE goal. ((FI Sum-Current Savings)/Annual Savings)
What Does It Help Me Calculate?
The calculator helps you calculate two important things in your FIRE journey. Those are:
- Financial Independence Sum: This is the total sum you would need to get in your FIRE journey for early retirement. This sum is based on what you expect your retirement lifestyle to be like. Generally, this sum is calculated for 25 years which would mean a 4% withdrawal rate, however, you can customize your withdrawal rate depending on your estimated lifespan.
- Time To Reach FI Sum: This is the total time it will take you to reach the calculated FI sum. The total time would depend on your total early retirement sum. Using this information, you can adjust your annual savings to reach your goal quickly.
Conclusion
A FIRE calculator, while not necessary for your FIRE journey, still can help you make your journey much easier. It can help you find out what amount of sum you require and how much savings you need to reach your desired goal. The goal of this calculator is to help you make better decisions in your FIRE journey and help you reach financial independence.
Disclaimer: This early retirement calculator is intended for informational purposes only and should not be considered financial advice. The results provided are based on the information you input and certain assumptions, and they may not accurately reflect your specific financial situation. It is crucial to consult with a qualified financial advisor or planner before making any retirement decisions or investments. The calculator’s estimates are subject to change due to fluctuations in financial markets, inflation rates, and other variables. Additionally, individual circumstances and goals may vary, and this calculator may not account for all relevant factors. By using this tool, you acknowledge that the results are not guaranteed and that you assume all responsibility for your financial choices.
