Your FIRE number is the investment portfolio size at which you are financially independent — the point where your investments generate enough passive income to cover your living expenses without needing to work. Calculating your FIRE number accurately is the foundation of every retirement plan.
The 25× Rule
The most widely used FIRE number formula:
FIRE Number = Annual Expenses × 25
This is derived from the 4% safe withdrawal rate — the research-backed finding that withdrawing 4% of a diversified investment portfolio annually has historically not depleted the portfolio over 30 years.
| Annual expenses | FIRE number (25× rule) |
|---|---|
| $30,000 | $750,000 |
| $40,000 | $1,000,000 |
| $50,000 | $1,250,000 |
| $60,000 | $1,500,000 |
| $80,000 | $2,000,000 |
| $100,000 | $2,500,000 |
Adjusting for a Long Retirement Horizon
The 4% rule was based on 30-year retirements. Australians who retire at 40 or 45 may have a 45–55 year retirement. Research suggests a more conservative withdrawal rate of 3.5% (or 28.6× expenses) for 40–50 year horizons.
| Withdrawal rate | Multiplier | $60,000/year requires |
|---|---|---|
| 4.0% | 25× | $1,500,000 |
| 3.75% | 26.7× | $1,600,000 |
| 3.5% | 28.6× | $1,715,000 |
| 3.25% | 30.8× | $1,846,000 |
Most Australian FIRE planners use 3.5–4% as their target withdrawal rate, with the lower end for earlier retirees.
Step 1 — Calculate Your Annual Expenses
Your FIRE number is anchored to your annual spending — not your income. Key steps:
- Track all spending for 3–6 months (or use the last 12 months of bank statements)
- Exclude saving and investing — these stop in retirement
- Include healthcare costs, insurance premiums, property costs
- Add a buffer for irregular costs (car replacement, home maintenance, travel)
Example: $45,000 groceries/utilities/transport + $10,000 travel + $5,000 misc = $60,000/year
Step 2 — Subtract Guaranteed Income Sources
Australian FIRE retirees have income sources that reduce the required portfolio:
| Source | When available | Approximate value (single) |
|---|---|---|
| Age Pension (full) | Age 67+ | ~$29,750/year |
| Age Pension (part) | Age 67+ | Depends on assets and income |
| Super pension | Age 60+ | Depends on super balance |
If you plan to claim the Age Pension at 67, you can subtract your expected pension entitlement from your annual spending to determine how much your portfolio must cover:
Example: $60,000 expenses − $20,000 expected part Age Pension (from 67) = $40,000 self-funded. FIRE number for this shortfall: $40,000 × 25 = $1,000,000.
Note: The Age Pension assets test means a $1,000,000 investment portfolio will affect your Age Pension entitlement — this needs careful modelling.
Step 3 — Split for the Super Gap
Australian retirees before 60 cannot access super. Your FIRE portfolio needs to be split:
- Personal investments (accessible now): must cover the years until preservation age 60
- Super balance (accessible at 60): covers post-60 retirement
Example — retire at 47 to age 90:
- 47–60 (13 years): Funded by personal investment portfolio
- 60–67 (7 years): Personal investments + super drawdown
- 67–90: Personal investments + super + Age Pension
The super gap period (47–60) requires sufficient personal investments outside super to self-fund without drawing super.
Worked Example
Profile: Couple, retire at 50, spend $80,000/year, target 40-year retirement (to age 90), both expect some Age Pension at 67.
| Calculation | Amount |
|---|---|
| Annual expenses | $80,000 |
| Less: expected part Age Pension (from 67, combined) | ($25,000) |
| Net self-funded annual need | $55,000 |
| FIRE number at 3.5% WR (28.6×) | $1,573,000 |
| Super combined (at age 50, inaccessible to 60) | $400,000 (say) |
| Personal investments required NOW | $1,173,000+ |
This illustrates why the super gap matters — a large super balance doesn’t help fund the early years of retirement.
Tools for Calculating Your FIRE Number
- ASIC MoneySmart Retirement Planner: Free online calculator — includes Age Pension, super projections
- Pocketbook / YNAB: Track current spending to determine your true annual expenditure
- FIRE spreadsheets: Community-built models available on Australian FIRE forums
Related Articles
- FIRE Savings Rate Australia
- FIRE and Super Australia
- FIRE and Age Pension Australia
- FIRE Withdrawal Strategy Australia
- FIRE hub
Frequently Asked Questions
Is the 4% rule safe in Australia? Research suggests the 4% rule is broadly applicable to Australian portfolios — Australian historical market returns have been sufficient to support it. However, for 40–50 year FIRE retirements, a 3.5% rate may provide more comfort. The Age Pension provides a meaningful safety net that the original US research didn’t account for.
Do I include my home in my FIRE number? No. Your primary residence is not a productive income-generating asset (unless you rent rooms or plan to downsize). Your FIRE number should consist of investment assets only — ETFs, shares, investment property (net of debt), super (accessible), and other income-producing assets.
Should I include my super in my FIRE number? Super is part of your overall retirement wealth — but if you retire before 60, it is inaccessible and should be treated separately from your immediately-accessible personal investment portfolio. Include super in your post-60 planning but not in your calculation of what you need available at retirement date.
This article provides general financial information only. Past investment returns are not a reliable indicator of future performance. For advice tailored to your situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.