Financial Independence (FI) means having enough invested assets to fund your lifestyle indefinitely without needing to work. This calculator uses the Trinity Study methodology and the 4% safe withdrawal rate rule as its foundation.
The 4% Rule and FI Number
FI Number = Annual Expenses / Safe Withdrawal Rate
Standard (4% rule): FI Number = Annual Expenses x 25
Conservative (3.5%): FI Number = Annual Expenses x 28.57
Very Conservative (3%): FI Number = Annual Expenses x 33.33
Example: $60,000 annual expenses at 4% SWR
FI Number = $60,000 / 0.04 = $1,500,000
Years to FI Calculation
The calculator projects portfolio growth year by year using the compound growth formula, adding annual contributions and investment returns until the portfolio reaches the FI number:
Portfolio(n) = Portfolio(n-1) x (1 + r) + Annual Savings
Where r = nominal annual return rate
Years to FI = first year where Portfolio(n) >= FI Number
FIRE Variants
LeanFIRE
Retire on a minimal budget, typically under $40,000/year. Requires a smaller FI number but less lifestyle flexibility.
FatFIRE
Retire with a generous budget, typically $100,000+/year. Requires a larger FI number but maintains a comfortable lifestyle.
BaristaFIRE
Semi-retire with part-time income covering some expenses. Allows retiring earlier with a smaller portfolio.
CoastFIRE
Invest enough early that compound growth alone reaches your FI number by traditional retirement age, without further contributions.
Worked Example
Inputs: $60,000 annual expenses, $100,000 current portfolio, $30,000 annual savings, 7% return, 3% inflation, 4% SWR, age 30.
FI Number: $60,000 / 0.04 = $1,500,000
Years to FI: ~17 years (reaching FI at age 47)
Real return: (1.07/1.03) - 1 = 3.88% p.a.
Insight: Increasing annual savings from $30,000 to $40,000 reduces years to FI from 17 to approximately 14 years -- a 3-year difference from $10,000 more savings per year.
Frequently Asked Questions
What is the 4% rule?
The 4% rule comes from the Trinity Study (1998) which analysed historical US market data from 1926-1995. It found that a portfolio of 50-75% equities could sustain a 4% annual withdrawal (adjusted for inflation) for 30 years with a 95%+ success rate. Your FI number is therefore 25x your annual expenses.
Is the 4% rule safe for early retirees?
The original study was based on 30-year retirements. For early retirees planning 40-50 year retirements, many researchers recommend 3-3.5% SWR. This calculator lets you adjust the SWR to model different scenarios. Karsten Jeske's research (Early Retirement Now) suggests 3.25-3.5% for 40-50 year horizons.
What return rate should I use for Australian investors?
The ASX 200 has returned approximately 9-10% nominally over the long run (including dividends). A diversified 70% equities / 30% bonds portfolio has historically returned 7-8%. After 3% inflation, real returns are approximately 4-5%. This calculator defaults to 7% nominal, which is a reasonable conservative assumption for a diversified portfolio.
Does this include superannuation?
This calculator treats all assets as a single portfolio. You can include your superannuation balance in the current portfolio value if you plan to access it in retirement. Note that super is generally not accessible until preservation age (currently 60), so early retirees may need a separate non-super portfolio to bridge the gap.
What is CoastFIRE?
CoastFIRE is the point at which your existing portfolio, left to compound without further contributions, will grow to your FI number by traditional retirement age (65-67). Once you reach your CoastFI number, you only need to earn enough to cover current expenses -- no further saving required.
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