Your FIRE number is the portfolio size that lets you retire, and the rule of 25 makes it simple: multiply your annual spending by 25. Spend $40,000 a year and your number is $1 million; spend $60,000 and it is $1.5 million. The maths is easy, but getting the spending figure right is where most people go wrong. This guide shows how to calculate a number you can trust.

The Rule of 25 in One Paragraph

The rule of 25 is the reciprocal of the 4% rule: if you can safely withdraw 4% of your portfolio each year, then you need 25 times your annual spending to retire. Annual spending of $40,000 times 25 equals a $1 million FIRE number. The rule assumes a diversified portfolio of stocks and bonds, a 30-year retirement, and inflation-adjusted withdrawals. It is a planning tool, not a guarantee, but it turns a vague dream into a concrete target.

Getting Your Spending Number Right

Most people underestimate their spending by 20-30%, because they forget irregular costs: car repairs, medical bills, travel, gifts and home maintenance. Track every expense for three months using a bank statement review or a budgeting app, then annualise the total and add 10% for the costs you missed. Include costs that change in retirement: health insurance may rise, commuting may fall. A FIRE number built on wrong spending is wrong by the same percentage.

Lean, Regular and Fat FIRE

Lean FIRE means retiring on under $40,000 a year, needing $750,000-1,000,000, and living frugally, often with geo-arbitrage in lower-cost regions. Regular FIRE covers $40,000-100,000 a year, needing $1-2.5 million, and supports a comfortable middle-class life. Fat FIRE means $100,000 or more a year, needing $2.5 million plus, and supports a high-spending retirement. Pick the version that matches the life you actually want, not the one that sounds impressive.

Adjusting for a Longer Retirement

The rule of 25 assumes 30 years, but an early retiree needs 40-50 years. Researchers recommend using 28-33 times spending for longer retirements, which means multiplying by 28.6 at a 3.5% withdrawal rate or 33.3 at 3%. A $50,000 annual spend needs $1.25 million at 25 times but $1.65 million at 33 times. The difference is the price of retiring at 40 instead of 65, and it is worth paying for the extra safety.

From Number to Plan

Once you have the number, work backwards: divide the gap between your current portfolio and your target by the years until retirement, then by 12 for a monthly savings goal. A $500,000 gap over ten years means saving about $4,200 a month before investment growth, less after growth is counted. Automate the savings on payday so the plan runs without willpower, and review the number every year as your spending and your life change.

Revisiting Your FIRE Number

Your FIRE number is not fixed: it changes as your life changes, and it should be recalculated every year. A new child, a move, a health issue, or a change in spending all shift the target, and a number set five years ago may be wrong today. The annual review is simple: update your spending figure from the last twelve months, multiply by your chosen factor, and compare with your portfolio. If the gap has shrunk, you are closer than you thought; if it has grown, you know what to fix. A FIRE number that is never revisited is a guess, not a plan.

Key Takeaways

- Your FIRE number is annual spending times 25, based on the 4% rule - Track three months of real spending and add 10% for forgotten costs - Lean FIRE needs under $1 million; fat FIRE needs $2.5 million plus - Early retirees should use 28-33 times spending, not 25

Frequently Asked Questions

What is the rule of 25? Multiply your annual spending by 25 to get your FIRE number. It is the reciprocal of the 4% safe withdrawal rate: $40,000 of spending needs a $1,000,000 portfolio.

A FIRE number turns a dream into a target. Get the spending right, pick your version, and work backwards to a monthly savings goal.