How to calculate your FIRE number: You might have enough money to retire already

Calculate your annual spending during your retirement

  • You might not have mortgage anymore. Then subtract it from your current annual spending
  • You might not have childcare costs anymore as your kids have grown up when you are trying to retire. Subtract them from your current annual spending
  • You might not have access to employer sponsored healthcare anymore. Add healthcare costs to your current annual spending
  • You might move to a new area when you retire. Subtract or add the cost difference

The 4% Rule

Photo by Austin Distel on Unsplash
  • You are 28 years old and do not have existing investment portfolio before this year
  • Your annual income is $50000
  • Your pre-tax savings rate is 15% meaning that you are saving 15% of your income before it gets taxed
  • Your savings are invested in VTSAX via your Traditional 401k and Traditional IRA, which reduced income tax quite a bit
  • I assumed a conservative income growth rate at 3%
  • No state tax for simplicity
  • Retirement spending will not be taxed using the withdrawal strategy I talked about in How to Retire Tax Free: Life after Financial Independence.




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