FIRE Calculator

What is the FIRE Movement?

FIRE (Financial Independence, Retire Early) is a movement focused on extreme savings and investment to allow retirement far earlier than traditional retirement age. The core idea is to accumulate enough investments that the passive income (typically through a safe withdrawal rate) covers all living expenses indefinitely.

The 4% Rule (Trinity Study)

The "4% Rule" originates from the 1998 Trinity Study, which found that a portfolio of 50% stocks and 50% bonds had a high probability of lasting at least 30 years with a 4% annual withdrawal rate. This means your FI Number = Annual Expenses / 0.04 = 25 times your annual expenses. For Canadian FIRE seekers, the availability of CPP and OAS benefits after age 65 provides additional security.

Types of FIRE

• Lean FIRE: Achieving financial independence on a minimal budget (typically 60% of normal expenses). Requires extreme frugality in retirement.
• Coast FIRE: Having enough invested now that compound growth alone will reach your full FI number by traditional retirement age (65). You still work but no longer need to save aggressively.
• Barista FIRE: Having enough invested to cover most expenses, supplementing with part-time or low-stress work for the remainder.
• Fat FIRE: Achieving financial independence with a generous budget (125% or more of normal expenses). Allows for a comfortable, unrestricted lifestyle in retirement.

Canadian Advantages for FIRE

Canada offers several unique advantages for those pursuing financial independence:

• CPP and OAS: Combined benefits of approximately $15,000/year at age 65 reduce your needed FI number significantly. This effectively lowers your withdrawal rate in later years.
• TFSA (Tax-Free Savings Account): Withdrawals are completely tax-free, making the TFSA an ideal FIRE vehicle. No tax drag on withdrawals means your 4% rule calculation is more straightforward.
• Universal Healthcare: Unlike the U.S., early retirees in Canada do not need to budget for health insurance premiums, which can save $10,000-$20,000+ per year.
• RRSP: Tax-deferred growth with tax deduction on contributions. Strategic withdrawals in low-income retirement years can be very tax-efficient.

Savings Rate: The Most Important Number

Your savings rate is the single most important factor in reaching FIRE. A higher savings rate both increases the amount you invest and simultaneously proves you can live on less. At a 50% savings rate with typical market returns, you can reach FI in roughly 17 years regardless of income level. At 70%, it drops to about 8.5 years.

Sequence of Returns Risk

The biggest risk for early retirees is poor market returns in the first few years of retirement. A major downturn early on can permanently impair your portfolio. Strategies to mitigate this include maintaining 2-3 years of expenses in cash or bonds, using a variable withdrawal rate, or having the flexibility to earn some income in the early years.