Financial Independence Calculator
How long until work becomes optional? This calculator projects when your investments could cover your living expenses, giving you the freedom to work on your own terms.
Your FIRE number is $1,750,000, based on $70,000 of annual spending and a 4.00% withdrawal rate.
With your current cashflow, you contribute $30,000 per year.
With the specified assumptions, you could reach financial independence at age 50.
Real return used: 7.50% (return - inflation).
Important note: Values displayed here are estimates for general planning. Real-world market returns are volatile and your situation may change. This is not financial advice. Consider speaking with a qualified professional.
What is financial independence?
Financial independence (FI) is the point where your investment portfolio generates enough returns to cover your living expenses indefinitely. Work becomes a choice, not a necessity.
This concept is central to the FIRE movement (Financial Independence, Retire Early). While "retire early" gets the attention, the real goal for most people is the independence part - having options.
Financial independence doesn't require:
- A massive salary (though it helps)
- Extreme frugality
- Never working again
It simply means reaching a point where you control your time.
The 4% rule explained
The calculator above uses what's known as the "4% rule" (or safe withdrawal rate) to determine your FI number.
This rule comes from the Trinity Study, which analyzed historical market data to find a withdrawal rate that would sustain a portfolio for 30+ years through various market conditions.
How it works:
If you can live on 4% of your portfolio annually, your investments should last indefinitely (historically speaking). This means:
| Annual Spending | FI Number (at 4%) |
|---|---|
| $40,000 | $1,000,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
The formula: FI Number = Annual Spending × 25
Or equivalently: FI Number = Annual Spending ÷ 0.04
Is 4% actually safe?
The 4% rule has limitations:
- Based on US historical data (may not apply globally)
- Assumes a 30-year retirement (early retirees need longer)
- Doesn't account for sequence of returns risk in early years
Many pursuing early FI use 3.5% or even 3% for extra safety. The calculator lets you adjust this.
Why pursue financial independence?
People pursue FI for different reasons:
Career flexibility
- Leave a toxic job without financial stress
- Take risks on a new career or business
- Negotiate from a position of strength
Time freedom
- Spend more time with family
- Pursue hobbies and interests
- Travel while you're still healthy
Reduced anxiety
- Weather economic downturns
- Handle unexpected expenses
- Sleep better knowing you have options
Purpose on your own terms
- Many FI people keep working - but on projects they choose
- Volunteer, create, or contribute without needing payment
The two variables that matter most
Your path to FI depends primarily on two things:
1. Savings rate
Your savings rate (what percentage of income you invest) is the single most powerful lever. It affects both sides of the equation:
- Higher savings = more invested each year
- Higher savings often = lower lifestyle expenses = lower FI number needed
| Savings Rate | Approximate Years to FI* |
|---|---|
| 10% | ~51 yrs |
| 25% | ~32 yrs |
| 50% | ~17 yrs |
| 75% | ~7 yrs |
*Assuming 5% real returns and starting from $0
2. Time
Compound interest needs time to work. Starting at 25 vs 35 can mean the difference of hundreds of thousands of dollars - not because you saved more, but because your money had longer to grow.
This is why delaying investing by even 5 years has such a dramatic impact.
Different paths to FI
Not everyone takes the same route. Depending on your lifestyle preferences:
Lean FIRE Reach FI faster by planning for lower expenses ($40k/year or less). Trade luxury for earlier freedom.
Coast FIRE Save aggressively early, then stop contributing. Your investments grow to your FI number while you work just enough to cover current expenses.
Barista FIRE Semi-retire with part-time work. Your job covers some expenses (and maybe health insurance) while investments grow.
Fat FIRE The opposite of Lean - plan for higher spending ($100k+/year). Requires a larger portfolio but maintains a more luxurious lifestyle.
Each approach has different tradeoffs between timeline, required savings, and lifestyle.
Common misconceptions
"I need to earn six figures"
Savings rate matters more than income. Someone earning $60k and saving 50% will reach FI faster than someone earning $150k and saving 10%.
"I have to live like a monk"
FI is about intentional spending, not deprivation. Many people find they spend less naturally once they stop buying things to cope with job stress.
"The market might crash"
The 4% rule already accounts for historical crashes. Diversification, flexibility in spending, and conservative withdrawal rates add additional safety.
"I'll be bored without work"
Most people pursuing FI don't stop working entirely. They shift to work they find meaningful, without the financial pressure.
Getting started
If you're new to FI, here's a practical path:
- Track your spending - You can't plan without knowing your current expenses
- Calculate your FI number - Use the calculator above
- Maximize tax-advantaged accounts - 401(k), IRA, HSA
- Invest in low-cost index funds - Keep it simple
- Automate - Set up automatic contributions so you don't have to think about it
The math is straightforward. The hard part is consistency over years.
Frequently Asked Questions
How is this different from retirement planning?
Traditional retirement planning assumes you'll stop working around 65. FI planning focuses on reaching the point where work is optional, regardless of age. The math is the same, but the timeline and mindset differ.
What if I want to retire before 59½?
You'll need funds accessible before retirement accounts allow penalty-free withdrawals. Common strategies include Roth conversion ladders, 72(t) distributions, or building a taxable brokerage account alongside retirement accounts.
Should I pay off debt first or invest?
Generally: pay off high-interest debt (credit cards) first. For lower-interest debt (mortgage, student loans), it's often better to invest while making regular payments. The math depends on interest rates vs expected returns.
What about healthcare costs?
Healthcare is a real concern for early FI, especially in the US. Options include ACA marketplace plans, part-time work with benefits (Barista FIRE), health sharing ministries, or planning for higher expenses.