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Retirement and financial independence (FIRE) calculator

How much capital you need to live off your investments, whether you reach it by retirement age, how much to save monthly and the age you could be independent.

Published by SolucionesAhora.com How we verify

Calculator inputs

  1. Enter your figures, or press “See example” to watch it work.
  2. If your case is unusual, open “Advanced options”.
  3. Read the result and, below it, what it means and how it was worked out.

Your age today, in completed years.

The age at which you would stop working. The calculator also tells you at what age you could do it with your current saving.

What you already have saved or invested for retirement, not counting your home.

What you save each month, in today’s money: it is assumed to rise with inflation to keep its value.

In today’s money

What you would spend each month once retired, in today’s money. A usual reference is 70% to 80% of your current spending, but it depends on whether you will have paid off your home.

In today’s money

The average annual return you expect from your investments, before taking off inflation. A cautious figure is better than the best historical period’s.

Nominal, before inflation

The average yearly rise in prices. It is used to work out the real return, which is what counts for your purchasing power.

Advanced options

What you expect to receive monthly from a state pension or other fixed income, in today’s money. It is subtracted from spending: the capital only has to cover the difference. Be cautious: the rules can change.

In today’s money; 0 if you do not count on it

The percentage of the capital you will withdraw each year. The “4% rule” comes from studies using US data and 30-year retirements; for longer retirements or lower future returns, lower rates (3% to 3.5%) are used, which require more capital.

% of the capital

See the result

Results

Capital you need (today’s money)270,000
Projected capital at retirement (today’s money)577,692.80
Gap (positive = shortfall)-307,692.80
Monthly saving needed184.56
Age at which you reach the target52
Sustainable monthly withdrawal1,925.64
Coverage of your spending168 %
Real annual return4.39 %
Projected capital in future money1,370,983.54
Capital by age
AgeCapital (today’s money)Capital (future money)Target capital
3126,997.8427,672.79270,000
3234,302.9136,039.5270,000
3341,928.6945,152.61270,000
3449,889.2555,068.4270,000
3558,199.3165,847.18270,000
3666,874.277,553.56270,000
3775,929.9390,256.83270,000
3885,383.23104,031.18270,000
3995,251.56118,956.15270,000
40105,553.13135,116.93270,000
41116,306.97152,604.82270,000
42127,532.92171,517.6270,000
43139,251.72191,960.04270,000
44151,485.01214,044.35270,000
45164,255.37237,890.75270,000
46177,586.37263,627.97270,000
47191,502.64291,393.92270,000
48206,029.87321,336.29270,000
49221,194.88353,613.24270,000
50237,025.67388,394.16270,000
51253,551.47425,860.45270,000
52270,802.79466,206.34270,000
53288,811.49509,639.84270,000
54307,610.82556,383.67270,000
55327,235.48606,676.28270,000
56347,721.71660,773.02270,000
57369,107.33718,947.27270,000
58391,431.84781,491.72270,000
59414,736.45848,719.73270,000
60439,064.18920,966.8270,000
61464,459.97998,592.08270,000
62490,970.691,081,980.06270,000
63518,645.291,171,542.37270,000
64547,534.881,267,719.63270,000
65577,692.81,370,983.54270,000
See the working step by step
  1. Real annual return = 4.39 %
  2. Projected capital in future money (with inflation) = 1,370,983.54

In short

What it calculates
How much capital you need to live off your investments, whether you reach it by retirement age, how much to save monthly and the age you could be independent.
Formula used
Real return = (1 + return) ÷ (1 + inflation) − 1; ρ = (1 + real)^(1/12) − 1
Example
Example 1. A plan that works.

Retirement and financial independence (FIRE) calculator

Planning retirement comes down to two questions: how much capital you need for your investments to pay your spending, and whether what you save today will get you there. The complication is inflation: future figures mislead because the money will be worth less.

This calculator always works in today’s money. Enter your age, your retirement age, your savings and monthly saving, the spending you want and the expected return and inflation. It tells you the capital you need, what you will have, how much to save each month to just get there, the age you would reach financial independence and, if you fall short, how many years your capital would last. Everything runs in your browser.

How it works

First the return is converted to real terms: (1 + return) ÷ (1 + inflation) − 1. With that return and a constant monthly saving in today’s money, the capital is projected month by month up to your retirement age.

The capital you need is the annual spending the pension does not cover divided by the withdrawal rate (with the 4% rule, 25 times that spending). If the projected capital reaches it, the plan works; if not, it works out how much you would need to save monthly, and how long the capital would last withdrawing the net spending each year.

Formula

Real return = (1 + return) ÷ (1 + inflation) − 1; ρ = (1 + real)^(1/12) − 1
Target capital = (monthly spending − pension) × 12 ÷ withdrawal rate
Projected capital = S·(1 + ρ)^N + m·((1 + ρ)^N − 1) ÷ ρ with N = months to retirement
Saving needed = (target − S·(1 + ρ)^N) · ρ ÷ ((1 + ρ)^N − 1)
Sustainable withdrawal = projected capital × withdrawal rate ÷ 12
Years the capital lasts = −ln(1 − K·real ÷ W) ÷ ln(1 + real) with W = annual withdrawal

Worked example

Example 1. A plan that works.
You are 30, with $20,000 saved and saving $500 a month; you expect a 7% return and 2.5% inflation (4.39% real); you want to spend $1,500 a month at 65 and will receive a $600 pension. The capital you need is $270,000 (in today’s money) and you project $577,693: plenty to spare. You would reach the target at 52, and at 65 you could withdraw $1,926 a month, 168% of your spending.

Example 2. No pension.
At 35, with $50,000 and $800 a month, at 6% with 2% inflation, to spend $2,000 a month at 67 with no pension you need $600,000; you project $775,301. You would reach the target at 62.2.

Example 3. A plan that falls short.
At 55, with $80,000 and $300 a month, at 4% with 2.5% inflation, to spend $2,500 a month at 65 with a $400 pension you need $630,000 and project $131,232. You would have to save $4,164 a month, or the capital would last about 5.5 years withdrawing what is missing. Starting late cannot be fixed with return.

Explanation

How much capital you need

The idea of financial independence is that your investments pay your spending. If you withdraw a fixed percentage of the capital each year, the capital you need is annual spending divided by that percentage. With the 4% rule it is 25 times your annual spending; at 3.25%, about 31 times.

The 4% rule and its limits

It came from simulations using historical US data: withdrawing 4% of the initial capital each year, adjusted for inflation, the capital lasted at least 30 years in almost all periods studied. But it is no guarantee: it depends on the country, the length of retirement (early retirement is much longer), future returns and the order of good and bad years at the start.

Why everything in today’s money

If you talk about $1,000,000 in 35 years, that money will buy far less. Working in today’s money, the target capital, the saving and the spending are comparable. The calculator also shows the projected capital in future money so you can see the difference.

What to do if you fall short

  • Save more (the calculator tells you how much).
  • Delay your retirement age.
  • Lower the target spending: it reduces both the capital needed and what you must save.
  • Cut the fees on what you invest in.

Common mistakes

  • Assuming the best historical period’s return.
  • Ignoring inflation.
  • Forgetting taxes and healthcare in retirement.
  • Counting on a state pension without checking it will stay the same.
  • Starting late.

Limits of this calculator

  • It assumes a constant return; it does not model risk, volatility or sequence of returns.
  • Monthly saving stays constant in today’s money.
  • It does not include taxes, healthcare costs or changes in spending during retirement.
  • The state pension is a figure you enter; it is not calculated.
  • The capital’s duration assumes constant annual withdrawals in today’s money.

Notice

The result is a projection with the assumptions you enter, not a promise or financial advice. For important decisions, consult an independent professional.

Frequently asked questions

How much money do I need to retire?

It depends on your spending and the pension you expect. With the 4% rule, the capital is 25 times the annual spending the pension does not cover.

What is the 4% rule?

A guideline saying you can withdraw 4% of the initial capital each year, adjusted for inflation, with a high chance of it lasting 30 years. It is a guide, not a guarantee.

What does FIRE mean?

Financial Independence, Retire Early. It means saving a lot so that investments pay your spending before the usual retirement age.

Why is it calculated in today’s money?

Because with inflation future money is worth less. In today’s money, the capital needed, the saving and the spending can be compared directly.

What return should I assume?

A cautious, long-term one. Using the best historical period’s makes the plan look easier than it is; also try a lower return.

How much should I save each month?

The calculator gives the monthly saving needed to just reach the target capital at your retirement age under the assumptions you set.

What if I retire earlier than planned?

Change the retirement age and you will see the needed capital jump and the projected one fall: each year earlier counts twice.

Is my data sent to a server?

No. The calculation runs in your browser.

Sources and references

The formula behind this calculator is not ours. These are the sources it comes from, in APA 7 format, in case you want to go to the original or cite them in your own work.

  1. Bengen, W. P. (1994). Determining withdrawal rates using historical data. Journal of Financial Planning, 7(4), 171–180. The origin of the “4% rule” for a sustainable withdrawal rate.
  2. Fisher, I. (1930). The theory of interest. Macmillan. The relationship between nominal rate, inflation and real rate used to work in today’s money.

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