Foundations of Calculating Your FIRE Number

Most people have a vague sense that they need "enough" to retire. Few have a specific, defensible number — and without a number, the goal remains abstract and the path stays unmapped. The FIRE movement developed a practical framework for calculating a personalized target, grounded in decades of historical market data and refined through ongoing research and real-world testing. By the end of this course you will be able to explain the logic of the 4% rule and its underlying assumptions, calculate a preliminary FIRE number based on projected annual expenses, and understand the key variables that make that number larger or smaller. What you will learn: - The origin and logic of the 4% rule, including the Trinity Study methodology and what time periods it was tested against - How safe withdrawal rates work, what their failure modes are, and why the 4% figure is conservative for most early retirees - How to project annual expenses in retirement, including costs that change (healthcare, childcare, travel) versus those that are relatively stable - The formula: annual expenses ÷ withdrawal rate = FIRE number, and how to apply it across different retirement durations - How inflation assumptions affect the real value of a portfolio over a 40- or 50-year retirement - The role of social security, pensions, or other income streams in reducing the portfolio size you actually need - Sensitivity analysis: how changing the withdrawal rate from 3.5% to 4.5% affects your target by hundreds of thousands of dollars - Common calculation mistakes: ignoring taxes on withdrawals, underestimating healthcare costs, and failing to account for sequence-of-returns risk The course presents the concepts through worked numerical examples and annotated case studies rather than abstract theory, making the underlying math accessible without requiring a financial background. Reflection prompts guide you through a preliminary version of your own calculation using real estimates from your life. This course is designed for anyone new to the FIRE movement who wants to understand what a financial independence number actually means and how it is derived. No prior background in finance or mathematics beyond basic arithmetic is required.