OraThe assumptions behind a FIRE calculation
A FIRE calculation is a scenario built from spending, income, contributions and return assumptions. A target or projected date does not establish that a retirement plan is sustainable.
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Separate three different questions
A financial-independence number asks what portfolio target follows from an annual spending gap and a selected withdrawal assumption. A FIRE timeline asks when current assets and future contributions might reach that target. Coast FIRE asks how much would need to be invested now to reach a future target without additional contributions.
These questions share inputs but answer different needs. A Coast FIRE result does not say present living costs are funded. A portfolio target does not give a retirement date. A timeline built on constant growth does not provide a probability of success.
Begin with spending that investments must cover
List recurring annual spending and provision for irregular costs. Then identify dependable income applicable to the same period. The remainder is the gap funded by investments. Match tax basis and money date: a gross pension estimate and an after-tax spending requirement are not directly interchangeable.
A 30,000.00 annual investment-funded gap divided by a chosen 4% gives 750,000.00. At 3% the arithmetic gives 1,000,000.00; at 5% it gives 600,000.00. These are sensitivity examples, not recommended withdrawal rates.
Income that begins later may reduce a later gap while leaving a bridge period to fund first. Do not subtract it from every year automatically.
Keep the projection in a consistent unit
If the target is in today's purchasing power, growth should be an assumption after inflation and relevant fees, with contributions expressed on a compatible real-money basis. A 5% real return assumption is not equivalent to a 5% nominal investment return.
Actual returns fluctuate. A model that adds the same percentage every period creates a useful scenario, not a market forecast. The Investor.gov risk overview explains why investment outcomes and purchasing power are uncertain.
Try a range of justified inputs and record why they were chosen. The result should remain labeled as a deterministic scenario.
The order of returns matters when money moves
Consider an original two-year arithmetic example: a 100,000.00 opening portfolio, 10,000.00 withdrawn at the end of each year and the same two returns in a different order. Ignore tax and fees solely to isolate timing.
On a narrow screen, scroll the table horizontally to see all columns.
| Return order | After year 1 growth and withdrawal | After year 2 growth and withdrawal |
|---|---|---|
| +20%, then −20% | 110,000.00 | 78,000.00 |
| −20%, then +20% | 70,000.00 | 74,000.00 |
Without withdrawals, both orders would finish at 96,000.00. With withdrawals, the outcomes differ by 4,000.00. A constant-return FIRE calculator does not reproduce this sequence risk or determine a sustainable withdrawal policy.
Coast FIRE discounts a distant target
Suppose a target of 750,000.00 in today's money is 25 years away. At a chosen 5% annual real growth assumption, required today = 750,000 ÷ 1.0525 = 221,477.078773…. Rounded upward to cents, that is 221,477.08.
The example assumes the investments remain untouched and receive no more contributions. Current living expenses still require funding. Lower growth, reduced time or withdrawals from those assets increase the amount needed now. The discounted result does not validate either the target or the growth assumption.
Include what a small model leaves out
Review taxes on investment income and withdrawals, healthcare, housing, dependants, debt, large one-off expenses, account-access restrictions, longevity and changes in household circumstances. The Investor.gov lifetime-income resource provides context on investment and longevity risks in retirement.
Keep accessible assets separate from funds that cannot be used when required. Fees reduce what remains invested; inflation changes the spending power of future withdrawals. A calculator cannot identify the right asset allocation or personal withdrawal policy from a handful of inputs.
Use the result as a reviewable worksheet
Write down the spending gap, income start dates, current accessible assets, contributions, target percentage and growth basis. Run a lower-growth scenario, a higher-spending scenario and a temporary contribution interruption. Save the assumptions rather than only the projected date.
The financial-independence target tool, FIRE timeline and Coast FIRE calculator help explore separate parts of the arithmetic. Before making an irreversible retirement or investment decision, a plan needs review appropriate to the actual person, assets and jurisdiction.
Common questions
Does the 4% assumption guarantee a lifelong income?
No. It is a selectable planning input. Horizon, market sequence, spending, inflation, fees and taxes affect outcomes.
What is the difference between FIRE and Coast FIRE?
A FIRE timeline models continued saving toward a target. Coast FIRE discounts a future target to a present amount with no further investment contributions; it does not fund current living costs.
Can I rely on the projected date to stop work?
No. A constant-return date is a scenario, not a financial-readiness certification. Review a fuller plan and the risks omitted by the calculator.
Educational estimate using the stated assumptions. Fees, taxes, changing rates and individual circumstances can change an outcome. This is not personalized financial advice. Read the estimates disclaimer.