Question 1

What is FIRE (Financial Independence, Retire Early)?

Accepted Answer

FIRE stands for Financial Independence, Retire Early. The idea is to save and invest aggressively so that your investment portfolio generates enough income to cover your living expenses — at which point work becomes optional. Your 'FI number' is the portfolio size that makes this possible, and reaching it is what FIRE is all about.

Question 2

How is the FIRE number calculated?

Accepted Answer

The most common approach uses the 4% rule: your FIRE number is your annual expenses multiplied by 25 (because 1 ÷ 4% = 25). If you spend $40,000 a year, your FIRE number is roughly $1,000,000. Adjusting the withdrawal rate changes the multiple — a more conservative 3.5% withdrawal rate means saving about 28.6x your annual expenses.

Question 3

What is the 4% rule and is it safe?

Accepted Answer

The 4% rule comes from research (the 'Trinity Study') suggesting that withdrawing 4% of your portfolio in the first year of retirement, then adjusting for inflation, has historically lasted 30+ years in most market scenarios. It's a useful planning benchmark, not a guarantee. Early retirees with longer horizons sometimes use a more conservative 3.5% or 3.25% rate for extra safety.

Question 4

Why does my savings rate matter more than my income?

Accepted Answer

Your savings rate — the percentage of your take-home pay you save — is the single biggest factor in how fast you reach FIRE. A high earner who saves 10% may take 40+ years; someone earning less who saves 50% can reach financial independence in under 17 years. A high savings rate both grows your portfolio faster and lowers the expenses you need to cover.

Question 5

What return rate should I assume for FIRE planning?

Accepted Answer

Most FIRE planners use a real (inflation-adjusted) return of around 5–7% for a stock-heavy portfolio, based on long-term historical averages. Using a real return keeps everything in today's dollars, so your FIRE number stays meaningful. Being conservative with your assumed return builds in a margin of safety against weaker market decades.

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