A FIRE calculator can help you determine how much money you need to save to achieve retire-early goals. It takes the guesswork out of retirement planning and gives you concrete steps to achieve early retirement.
With FIRE, you don’t have to wait until the traditional retirement age to enjoy the good life; you can retire much sooner and have all the funds you need.
Our Savvy FIRE Retirement Calculator
Your FIRE number is the amount of money you’ll need to invest so that your earnings will be enough to cover your everyday expenses in retirement.
This figure is calculated only on your projected yearly spending in retirement and your Safe Withdrawal Rate (SWR).
Here’s how our FIRE calculator works to get your FIRE age:
- In the early retirement calculator, enter your current age in years.
- Next, you want to estimate your current investment portfolio. This is the money you have saved up in retirement accounts like a 401(k) or IRA. If you don’t have any retirement accounts, leave this section blank.
- Then, you want to add your monthly contribution to your retirement investment portfolio. This is the money you’re investing each month or putting into a high-yield savings account.
- After that, you need to add your rate of return or savings rate. This is the annual fixed percentage return or savings rate based on today’s dollars you expect to earn on your investment returns.
- Lastly, you need to estimate your current annual expenses. This is the amount of your annual spending on things like housing, food, transportation, and other living expenses.
- Once you’ve entered all of the information, our calculator will give you a FIRE number. This is the amount of money you need to have invested to cover your annual expenses in retirement.
You can also adjust your FIRE factor by changing the current age, investment portfolio, monthly contribution, investment rate of return, and annual spending in the early retirement calculator to see how it affects your FIRE age and FIRE goal.
Once you’ve played around with some numbers, you may find you’re in a good spot- but others may need to find ways to save and invest more.
Let’s talk a bit more in-depth about what FIRE is and how you can achieve financial independence early and retire in style.
What Is FIRE?
FIRE stands for Financial Independence, Retire Early. And it’s not just a dream– FIRE is entirely achievable if you start planning now.
The idea behind FIRE is to save as much money as possible so that you can eventually quit your day job and live off of your investments.
The FIRE movement has gained popularity in recent years as more and more people are looking for ways to retire early.
Current Financial Status
To begin your path to FIRE, you must first understand where you presently stand financially. Are you financially free, or do you live paycheck to paycheck?
Your current financial status can be divided into four key areas:
- Income: Your annual income is the amount of money you earn in one year before taxes.
- Expenses: Your annual expenses are the amount of money you spend in one year. This includes everything from your mortgage or rent to your daily coffee habit.
- Assets: Your assets are anything of value that you own, such as a home, a car, or investments.
- Debts: Your debts are money you owe, such as student loans, credit card debt, or a mortgage.
You can use a money management tool like Empower (formerly Personal Capital) to get an overview of your finances and get budgets started to make saving and investing easier.
Your Savings
Your savings play a significant role in how quickly you can achieve FIRE. The more you can save each month, the sooner you’ll reach your financial goals.
There are two types of savings you should focus on:
Emergency Fund: An emergency fund is a cash reserve that you can use in an unexpected event, such as a job loss or medical emergency. It’s essential to have at least 3-6 months of living expenses saved so that you’re covered if something unexpected happens.
Retirement Fund: A retirement fund is money you set aside for later in life. This can be in a 401k, IRA, or other investment accounts. The earlier you start saving for retirement, the better– but it’s never too late to start!
The 4% withdrawal rate rule is a good starting point for estimating how much you’ll need to have in retirement savings. It accounts for the future inflation rate and life expectancy.
This rule states that you should have enough money saved for a withdrawal rate of 4% of your savings each year. So if you make $60,000, your withdrawal amount is $2,400.
Your Investments
To reach your FIRE goal, you’ll need to make wise investments, whether you invest in your retirement, the stock market, or other options.
- Start Investing Early: Time is one of the most important factors for investing. Money has more time to earn some returns and grow.
- Diversify your portfolio: Don’t put all your eggs in one basket. Diversifying your investments will help protect you from market volatility.
- Understand Your Risk Tolerance: Before investing, it’s crucial to understand how much risk you’re comfortable with. This will help you choose the suitable investments for you.
- Create a Plan: Investing can be complex, so it’s essential to have a plan. Work with a financial advisor to create an investment plan that meets your needs.
Your Retirement Plans
The entire basis behind the FIRE movement is retiring early with a well-thought-out retirement plan. With FIRE, you retire much sooner than the traditional retirement age.
You need to have a clear idea of when you want to retire and how much retirement savings you’ll need. This will help you determine how much you need to save and invest each month.
If you’re not sure where to start, there are plenty of resources available to help you plan for retirement. Empower has an excellent Retirement Planner tool that can help you plan.
Tips To Reach FIRE Goals
Make A Solid FIRE Plan
The first step to Financial Independence, Retire Early, is making a solid plan. You need to know where you want to go and how you’ll get there. Without a plan, it will be challenging to reach your FIRE goals.
- Based on your current age, what is your target retirement age?
- Are you saving for retirement?
- What is your annual income growth rate?
- Are you carrying any debt that will follow you into retirement?
Another thing you need to decide is what age you want to retire. Life expectancy is increasing, so you may need to work a little longer to save enough money.
Also, include the inflation rate in your retirement strategy. Inflation will reduce the purchasing power of your money over time, so you’ll need to account for that in your FIRE plan.
Save More Money
One of the best things you can do to reach your FIRE number is to save more. The more you can save, the sooner you’ll reach financial independence and early retirement.
Saving money can be difficult, but there are ways to make it easier. You can start by automating your savings to transfer money into your high yield savings account, like one at CIT Bank that has a higher savings rate, each month automatically.
You can also try to reduce your expenses. Take a look at your budget and see where you can cut back.
Lower Your Bills & Spending
One way to save more is to lower your bills and annual spending. There are many ways to do this. You can start by looking at your current spending and see where you can cut back.
Negotiate your bills to get a lower payment or interest rate. Many companies are willing to work with you if you’re having trouble paying your bill. They may be able to offer you a lower rate or a payment plan that works better for your budget.
Make More Money Invest Whenever Possible
Stocks, bonds, mutual funds, and index funds are popular ways to invest and earn passive income. You can invest in these through a brokerage account or a Robo-advisor like Betterment.
Investing in real estate can help you reach your FIRE number. Do this through buying property or investing in a real estate investment trust (REIT).
It’s essential to diversify your investments to avoid putting all of your eggs in one basket. This will help reduce your risk and make it more likely to reach your FIRE goal.
Increase Your Current Annual Income
A side hustle is a great way to add to your current annual income. Having multiple income streams on top of your 9-5 and investing can grow your cash flow and help make retirement come even sooner.
Some side hustles you can do is start a blog, become a freelancer, or even start a small business.
All of these options will help increase your income growth rate. And the more you make, the sooner you’ll reach financial freedom and early retirement.
1. Blogging
Our favorite side hustle is blogging! With this side hustle, you can work from any location, at any time. You need a computer, a website, and an internet connection.
Once your website is set up, you can start writing content and promoting your site. You’ll make extra income from advertisements, sponsorships, and affiliate marketing.
2. Proofreading
Proofreading is a service that helps people correct errors in their writing. This can include typos, grammatical errors, and more.
You can sign up for a proofreading course like Proofread Anywhere to start proofreading. It also offers a free workshop to introduce you to proofreading and give you a feel for what you’d do in a proofreading business.
3. Freelance Writing
You can earn extra income by becoming a freelance writer! You can write articles, blog posts, or even ebooks with this side hustle.
You can sign up for a course like Freelance Write From Home to learn how to start freelance writing and create a business around your writing skills.
4. Bookkeeping
Bookkeeping may be the perfect side hustle if you’re good with numbers! Bookkeepers help businesses keep track of their finances.
Bookkeeper Launch has a free workshop that shows you how to start a bookkeeping business. They offer a free workshop that shows you how to start a profitable online bookkeeping business.
How To Invest & Where
Start NOW
Everyone should start investing young, and if you haven’t started investing yet, you need to start today! Time is your best asset to gain early retirement. The sooner you start investing, the more time the money invested has to grow and the sooner you can take retirement.
There are a variety of investment options. As mentioned earlier, stocks, bonds, mutual funds, and index funds are all viable options. You may also invest in real estate or other assets.
Diversifying your investments will keep you from putting all of your eggs in one basket. It will help reduce your risk and make you more likely to reach your goals.
Determine Your Investment Strategy
The best way to reach your goals is to create an investment strategy to improve your asset allocation and then stick to it. Determine how much risk you’re willing to take and your investment goals.
Once you have a clear investment strategy, you can start investing. Remember to stay disciplined and invest regularly.
Some questions to ask to help you determine your investment strategy are:
- How much you’re going to invest?
- Where are you going to invest?
- What is your investment timeline for a safe withdrawal rate?
- What is your risk tolerance?
- Do you plan to sell your investments or hold them long-term?
If you don’t have an investment strategy to make the best investments, it’s easy to make impulsive decisions that can cost you more.
Set Aside Money To Invest
The best way to set aside money to invest each month is to set up a budget and prioritize investing. Determine how much you can afford to invest each month and set that amount aside.
You can use an online budgeting tool like Empower or Mint to help you create a budget and track your spending.
You can also automate your investing by setting up a monthly transfer from your checking account to your investment account. Automating your investing will help you stay disciplined and make sure you’re investing regularly.
Start small and increase the amount you’re investing each month as you get comfortable. The important thing is to start investing today!
Pick An Investment Platform
There are many platforms to choose from. Each platform has its own set of features to show you things like the annual growth rate of your investments.
- Robinhood: Robinhood is a DIY trading platform that offers free stock. With Robinhood, you can trade stocks, options, and crypto without paying any commissions.
- M1 Finance: M1 Finance is a Robo-advisor service with pre-made pies. It’s an excellent platform for those who want hands-off investing with the ability to customize their portfolios.
- Betterment: Betterment is a Robo-advisor service. You can trade stocks and ETFs for free and get financial advice from a Betterment financial advisor.
- Acorns: Acorns is a micro-investing service. Once you start using Acorns, it rounds up your spare change and invests it for you.
- Fundrise: Fundrise is a real estate investing platform. You can be on your way to owning real estate without managing the property yourself.
- FarmTogether: FarmTogether is known for its agricultural investing platform. With FarmTogether, you can invest in farms and agricultural projects.
Final Thoughts
The FIRE calculator can be a valuable tool for anyone interested in achieving financial freedom.
It can help you calculate how much you need to save and the savings rate you need to reach your goals.
With a little planning, discipline, and investment advice, you can achieve FIRE, live life on your own terms, and retire early.
Try out our FIRE calculator today and invest with platforms like Robinhood and Betterment to get on track for your early retirement.
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