Calculate your FIRE number
Multiply your expected annual spending by 25 to find the portfolio size that supports a 4% withdrawal.
Key takeaways
- What it is: Multiply your expected annual spending by 25 to find the portfolio size that supports a 4% withdrawal.
- Why it works: The 25x rule is the mathematical inverse of the 4 percent withdrawal rate: if you withdraw 4% per year, you need 25 years of spending saved (1/0.04 = 25). This gives a concrete target that converts an abstract savings goal into a trackable number, which research on goal-setting shows is more motivating than a vague "save more" framing. The concreteness also forces an honest audit of actual spending before projecting a number.
- Evidence: Backed by observational / correlational evidence.
- Avoid: Using current spending without projecting how retirement changes it — especially healthcare, which rises, and commuting/work costs, which fall.
Why it works
The 25x rule is the mathematical inverse of the 4 percent withdrawal rate: if you withdraw 4% per year, you need 25 years of spending saved (1/0.04 = 25). This gives a concrete target that converts an abstract savings goal into a trackable number, which research on goal-setting shows is more motivating than a vague "save more" framing. The concreteness also forces an honest audit of actual spending before projecting a number.
How to do it
- 1Track your current annual spending across all categories for at least 3 months.
- 2Project which expenses change in retirement (commuting down, healthcare up) and recalculate.
- 3Multiply the revised annual spend by 25 to get your portfolio target.
- 4Use the number as a milestone, not a cliff — model what happens at 24x or 26x too.
What the evidence says
ObservationalThe 25x multiplier derives directly from Bengen’s 1994 research and the Trinity Study. Both found 4% initial withdrawal succeeded in roughly 95%+ of historical 30-year periods for a diversified stock-bond portfolio.
Honest caveat: Both studies use US historical data. Applying US past returns to future or non-US scenarios is an extrapolation. Lower expected future returns (lower Shiller CAPE-implied returns) suggest a more conservative number for early retirees with longer horizons.
- — Bengen (1994), "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning
- — Cooley, Hubbard & Walz (1998, updated 2011), "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable," AAII Journal
Common mistake
Using current spending without projecting how retirement changes it — especially healthcare, which rises, and commuting/work costs, which fall.
IX Coach walks you through a structured spending audit to surface your real number rather than an optimistic estimate, then tracks your portfolio progress against it over time.
Practice this with IX Coach →