Retirement Planner
Estimate your path to Financial Independence (FIRE).
Understanding Your Path to Financial Independence
Planning for retirement—or specifically aiming for FIRE (Financial Independence, Retire Early)—is less about guessing and more about understanding the relationship between your savings rate, your spending, and the power of compound interest.
What is the Retirement Savings Calculator (FIRE) Calculator?
The Retirement & FIRE Calculator is a forecasting tool designed to answer two critical questions: “How much money do I need to stop working?” and “Am I currently on track to reach that amount?”
Unlike traditional retirement planning, which often focuses solely on age (e.g., “I will retire at 65”), the FIRE methodology focuses on a financial number. Once your investments generate enough passive income to cover your living expenses, you are financially independent, regardless of your age.
Think of it this way: Imagine your savings is a snowball rolling down a hill. At first, you have to push it manually (your monthly contributions). Eventually, the snowball becomes large enough that its own momentum (compound interest) makes it grow faster than you could ever push it. This calculator tells you how big that snowball needs to get and when it will be ready.
The Science Behind the Numbers
This calculator relies on two fundamental financial concepts: Compound Interest and the Safe Withdrawal Rate.
1. Compound Interest
This is the engine of your wealth. It is the interest you earn on your interest. Over long periods, the money your money earns becomes more significant than the money you work for.
The simplified formula used to project your future savings is:
FV = P × (1 + r)^n + [ PMT × (((1 + r)^n - 1) / r) ]
Where:
- FV: Future Value (Your Projected Portfolio)
- P: Principal (Current Savings)
- r: Monthly Interest Rate
- n: Number of Months
- PMT: Monthly Contribution
2. The Rule of 25 (The FIRE Number)
How do we know how much is “enough”? The calculator uses the widely accepted 4% Rule, which suggests that if you withdraw 4% of your portfolio in the first year of retirement and adjust for inflation thereafter, your money has a very high probability of lasting 30 years or more.
To find this number, we use the inverse of 4%, which is 25.
Target Portfolio = Desired Annual Income × 25
For example, if you need $60,000 a year to live comfortably, you need a portfolio of $1.5 million ($60,000 × 25).
How to Use This Calculator
Follow these steps to generate your personal projection:
- Set Your Timeline:
- Current Age: Enter your age today.
- Retirement Age: Enter the age you hope to stop working. This determines the time horizon (n) for your investments to grow.
- Enter Your Starting Point:
- Current Savings: Input the total value of your retirement accounts (401k, IRAs, Brokerage) right now.
- Define Your Fuel:
- Monthly Contribution: How much new money are you adding to these investments every month?
- Set Your Target:
- Desired Annual Income: Getty ImagesExplore This is crucial. How much cash do you need annually in retirement? Be realistic about your future cost of living.
- Adjust the Engine:
- Expected Annual Return: Use the slider to set an estimated growth rate. A common benchmark for the S&P 500 (adjusted for inflation) is often cited between 7% and 8%. If you want to be conservative, slide this down to 5-6%.
Interpreting Your Results
Once you click Calculate, the tool compares your Projected Portfolio against your FIRE Number.
- The Progress Bar: This gives you a visual “health check.”
- Green: You are on track! Your projected savings exceed your target number.
- Yellow: You are close. You might need to work a year longer or save slightly more to bridge the gap.
- Red: There is a shortfall. This suggests you need to increase your contributions, lower your desired retirement income, or extend your working timeline.
- Projected Portfolio vs. Total Contributions: Pay attention to the difference between these two numbers. The difference represents Interest Earned. In a healthy retirement plan, the interest earned should eventually dwarf your actual cash contributions.
- The FIRE Number: This is your finish line. If this number feels daunting, remember that lowering your annual expenses lowers this target drastically. Every $1,000 less you spend per year is $25,000 less you need to save.
Limitations to Keep in Mind
While this calculator provides a powerful estimate, it is a simplified model of a complex reality.
- Inflation is Not Explicit: Unless you adjust your “Expected Return” downward to represent a “real return” (e.g., using 7% instead of a nominal 10%), the final dollar amounts shown are in future dollars, which will have less purchasing power than today’s dollars.
- Sequence of Returns Risk: The calculator assumes a smooth, constant return (e.g., exactly 7% every single year). In reality, the stock market is volatile. If you experience a market crash right before or right after you retire, your portfolio’s success rate may drop, even if your average return was accurate.
- Taxes Are Not Included: The calculator looks at gross numbers. It does not distinguish between a Roth IRA (tax-free withdrawal) and a Traditional 401k (taxed as income upon withdrawal). You may need to save more than the estimate to account for the tax bill due on withdrawal.
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