Your FIRE Number: the 4% Rule, Lean, Fat and Coast

The headline formula is brutally simple:

The 4% safe withdrawal rate comes from the **Trinity Study** (Cooley, Hubbard, Walz, 1998), which back-tested historical US stock and bond returns to find the highest withdrawal rate that would have survived every rolling 30-year period from 1926 onwards.

The conclusion: a portfolio with 50-75% stocks and the rest in bonds, withdrawing 4% in the first year and adjusting that dollar amount for inflation each year afterwards, had a roughly 95% success rate over 30 years. Translation: if you have 25× your annual expenses invested in such a portfolio, you can almost certainly live off it for 30 years.

If your annual expenses are $50,000, your FIRE number at 4% is $1,250,000. At 3%, it's $1,666,667. At 5%, it's $1,000,000.

The community has invented several flavours of FIRE to reflect different goals:

The 4% rule was based on a **30-year retirement** — appropriate if you retire at 65 with a 95-year life expectancy. But early retirees aiming to leave work at 40 or 45 are planning for 50+ years of withdrawals. The Trinity Study's success rate drops considerably over longer horizons.

For this reason, many serious FIRE planners use **3% to 3.5%** as their safe withdrawal rate. This raises the FIRE number meaningfully — at 3%, you need 33× expenses, not 25× — but it provides much more buffer against sequence-of-returns risk, longer-than-expected lifespans, and unexpected expenses.

A useful intuition: the difference between 4% and 3% is about a third more savings, but the difference between a 30-year and 50-year time horizon is significantly more years your portfolio needs to survive uninterrupted.

The 25× rule is simple, but its simplicity hides several real risks that can break the math:

• **Sequence-of-returns risk.** A bear market in the *first* few years of retirement does far more damage than the same drop in year 20. You're withdrawing while balances are depressed, locking in losses. A bond ladder or 2-3 years of cash reserves at retirement helps cushion this.
• **Healthcare before Medicare.** In the US, Medicare starts at age 65. Early retirees face $15,000–$25,000/year per couple for ACA marketplace coverage, varying by state and income. Add this to your "annual expenses" line, or your FIRE number is too low.
• **Inflation.** The 4% rule already adjusts for inflation, but only if you assumed a *real* return (after inflation). If you used a nominal 7% return, the actual safe withdrawal in inflation-adjusted dollars is closer to 4%-of-real, not 4%-of-nominal.
• **Taxes.** The simple formula gives gross withdrawals. In practice, traditional 401(k) and IRA withdrawals are taxable as ordinary income; brokerage withdrawals at long-term capital gains rates; Roth withdrawals tax-free. A well-diversified mix can keep effective tax rates very low — but the formula doesn't do this work for you.
• **Lifestyle inflation.** Most people's expenses creep upward over decades. A FIRE number based on today's thrifty 30-year-old expenses may not last a 60-year-old who likes to travel.

Three steps:

1. **Track your annual expenses for 12 months.** Use a tool (Monarch, YNAB, Lunch Money) or even a spreadsheet. Most people guess significantly too low — a year of real data is the only honest input.
2. **Add healthcare and discretionary buffer.** If you're US-based and not yet 65, add $15-25k/year per couple for ACA insurance. Add another 10-20% for the discretionary spending early retirement tends to enable (you'll have more free time to spend money).
3. **Pick your SWR.** 4% if you're retiring late or comfortable with some risk. 3.5% if early-retiring (under 50). 3% if very risk-averse or planning for 50+ year horizons.

Most FIRE portfolios converge on a similar structure: a heavy allocation to global stock index funds (often 70-90%), a smaller bond / cash allocation for stability (10-30%), and increasingly REITs or international equity for diversification. The most-cited template is the "VTSAX and chill" approach — a single low-cost total US stock market fund.

Tax-advantaged accounts come first: max your 401(k) (especially with employer match), max IRA contributions, max HSA if eligible (the HSA Calculator shows the triple-tax-advantage value). Anything above contribution limits goes into a taxable brokerage account.

For UK readers, the equivalent stack is: max your pension (employer match first), max your £20k annual ISA allowance — likely a Stocks & Shares ISA in low-cost global index funds — and use Lifetime ISA contributions for the 25% government bonus if you qualify.

Coast FIRE is often overlooked but it's arguably the most powerful psychological milestone on the path. It's the point where you have enough invested *today* that, with zero further contributions, the money will grow to your full FIRE number by traditional retirement age.

At a 7% real return, Coast FIRE is about **9%** of your full FIRE number for a 30-year-old with 35 years to traditional retirement age — the horizon shrinks the older you are, since it's simply retirement age minus your current age. So if your target is $1.25M at 65, you only need $117k saved at 30 to "coast" — your existing investments compound to the target on their own.

This matters because it converts the FIRE journey from "savings sprint" to "earn-just-enough-to-cover-current-expenses". After hitting Coast, you can downshift to a lower-paying job you actually enjoy, take long sabbaticals, or work part-time — knowing retirement is already taken care of.