FIRE Number Calculator

Formula

The formula to calculate the yearly savings needed is:

\[ \text{Save}_{\text{year}} = \frac{\text{Amt}_{\text{req}} \times (\text{r} - \text{g})}{(1 + \text{r})^{\text{n}} - (1 + \text{g})^{\text{n}}} \]

where:

$\text{Save}_{\text{year}}$ = Yearly savings
$\text{Amt}_{\text{req}}$ = Total amount required (FIRE number)
$\text{r}$ = Savings rate of return (%)
$\text{g}$ = Salary growth rate (%) or inflation
$\text{n}$ = Years of saving

Description

This calculator helps you determine how much you need to save per year to reach your FIRE (Financial Independence, Retire Early) number. It considers your desired retirement savings amount, expected rate of return on savings, salary growth rate (or inflation), and the number of years you plan to save.

Example Calculation

Let's take an example:

Current age: 30 years old
Current income: $80,000 per year
Years of saving: 30 years
Current savings: $0
Savings' rate of return (%): 5%
Salary growth rate (%) (inflation): 2.5%
Years in retirement: 20 years
Total amount required: $1,000,000

Step 1: Plug the values into the formula:

\[ \text{Save}_{\text{year}} = \frac{1,000,000 \times (0.05 - 0.025)}{(1 + 0.05)^{30} - (1 + 0.025)^{30}} \]

Step 2: Calculate the numerator and denominator:

Numerator: $1,000,000 \times 0.025 = 25,000$

Denominator: $(1.05)^{30} - (1.025)^{30} = 4.321942 - 2.096053 = 2.225889$

Step 3: Divide the numerator by the denominator:

\[ \text{Save}_{\text{year}} = \frac{25,000}{2.225889} = 11,239.11 \]

Thus, you need to save $11,239.11 per year to reach your FIRE number of $1,000,000 in 30 years.