Welcome to the Up the Gains FIRE Calculator. I’ve created this calculator to help you understand how long it will take until you can reach financial freedom and retire early.
Please enter all of your entries in below correctly to calculate your very own FIRE number. You will need to complete all boxes correctly in order for the graph at the bottom to propogate.
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Main Features Include:
- Innovative dashboard showing your full financial picture
- Templated scenarios for personal or household budgets
- Debt organiser and repayment planner
- Financial Freedom Calculator
- Pensions and Investments Dashboard
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Personal Net Worth Calculator
What Is FIRE (Financial Independence Retire Early)
FIRE stands for “Financial Independence, Retire Early.” This phrase was first coined in 1992 by Vicki Robin and Joe Dominguez in their best-selling book “Your Money or Your Life.”
It’s a lifestyle and financial movement that advocates for saving and investing aggressively to achieve financial independence.
The ultimate goal is to accumulate enough wealth to sustain one’s living expenses without needing to work for income.
This allows individuals to retire much earlier than the traditional retirement age and spend their time as they wish, whether that’s travelling, pursuing hobbies, or even working on passion projects.
How To Use Our FIRE Calculator
If you’re looking to achieve financial freedom earlier than expected, the FIRE Calculator might be the perfect solution for you. The idea behind it is to generate enough wealth to support you in your retirement without further contributions.
I’ve made this calculator to show you how achieving FIRE is possible. Entering the correct fields will allow you to visualise how close you are to achieving FIRE and what it would take to get to full FIRE.
Follow this list below to understand how each section is interacting with each other:
- Start by selecting your currency: This calculator is made for US dollars, British Pounds, and Euros.
- Enter your current age and your desired retirement age: This will help tailor the calculations to your specific timeline.
- Then enter your current invested net worth: This should include all the investments that you have in your ISA or 401k. This doesn’t include things like savings, as the growth rate will be different.
- Adjust the investment growth rate: You can change how much your investments are expected to grow using the investment growth rate slider.
- Input your expected annual spending in retirement: This number should be what you need to live comfortably.
- Set the inflation rate: The average is typically between 2.5-3%.
- And lastly, your safe withdrawal rate: Most experts suggest this to be around 4%.
Once you have followed all of these steps, you will be presented with the graph below. This allows you to see precisely when you will reach FIRE. If you enter an amount too low, the graph will also tell you what adjustments need to be made in order for you to reach FIRE.
There is a full FIRE number line added in, so you can see the difference between achieving FIRE and full FIRE. You’ll notice these numbers and graphs will change based on what you select, so you will easily be able to work out how much you need to invest.
The point on the graph where the two lines meet is your FIRE number. You’ll then be told the length of time it takes to get you there.
How to calculate my FIRE number?
Your FIRE number is the amount of money you need to have invested to live off the interest, dividends, and capital gains without depleting the principal amount.
The most commonly used method to calculate this is the 4% Rule, also known as the Safe Withdrawal Rate (SWR). Here’s how to calculate your FIRE number:
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Estimate Annual Expenses: Calculate how much you expect to spend annually during retirement.
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Apply the 4% Rule: Divide your estimated annual expenses by 4% (or multiply by 25).
FIRE Number=Annual Expenses×25
How to factor in inflation?
Inflation can erode the purchasing power of your money over time. In our calculator, we’ve factored in inflation to give you a more accurate estimate.
Generally, you would adjust your annual expenses for inflation using the following formula:
Inflation-Adjusted Expenses = Annual Expenses × (1 + Inflation Rate) raised to the power of Number of Years
You would then use these inflation-adjusted expenses to recalculate your FIRE number.
What do I need to consider about FIRE?
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Investment Strategy: Your investment portfolio needs to be diversified and aligned with your risk tolerance.
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Tax Implications: Consider the tax efficiency of your investments, especially when drawing down your portfolio.
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Healthcare Costs: These can be significant, especially if you plan to retire before you’re eligible for state healthcare benefits.
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Lifestyle Changes: Your expenses could change significantly in retirement, either increasing due to more leisure activities or decreasing as work-related costs go away.
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Market Volatility: The 4% Rule is based on historical data, and past performance is not indicative of future results. Market conditions could affect your portfolio’s sustainability.
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Emergency Fund: It’s advisable to have a separate emergency fund to cover unexpected expenses without affecting your investment portfolio.
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Ongoing Assessment: Regularly review your financial plan to ensure you’re on track to meet your FIRE goals.
By considering these factors, you’ll be better prepared to embark on your FIRE journey.
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