Your FIRE Number Is Probably Wrong

“My FIRE number is €1 mil­lion.” That state­ment gives you a start­ing point, not a plan. You still need the age when you want to stop work­ing, the spend­ing you expect in re­tire­ment, the date your mort­gage ends, the pen­sion income you expect, and the taxes on your with­drawals.

Two house­holds can start with the same bal­ance and face very dif­fer­ent cash flows for the next 40 years.

Start with the 25× short­cut

The fa­mil­iar cal­cu­la­tion comes from the rec­i­p­ro­cal of a 4% with­drawal rate:

$$\text{Target} = \frac{\text{Annual portfolio spending}}{0.04} = 25 \times \text{Annual portfolio spending}$$

If your port­fo­lio must pro­vide €40,000 in the first re­tire­ment year, the short­cut gives you a €1 mil­lion target.

William Ben­gen’s 1994 re­search tested a 4% first-year with­drawal fol­lowed by inflation ad­just­ments against his­tor­i­cal US stock, bond, and inflation data. His sample sup­ported at least 30 years across the pe­ri­ods he stud­ied.^[1] Cooley, Hub­bard, and Walz tested a wider range of rates and port­fo­lio mixes in 1998, cov­er­ing 15- to 30-year pe­ri­ods while ex­clud­ing taxes and trans­ac­tion costs.^[2]

The short­cut earns its place be­cause it con­nects annual spend­ing to a clear cap­i­tal target. It also com­presses a long re­tire­ment into one number, so use it for ori­en­ta­tion.

Put the number on a time­line

Your spend­ing will change. A mort­gage can end, travel can in­crease during the first re­tire­ment decade, chil­dren can leave home, and large costs can arrive in specific years. A bank state­ment from last year gives every future year the same shape. A pro­jec­tion lets each period have its own spend­ing level.

Taxes create an­other gap. If you need €40,000 after tax and assume a 15% ef­fec­tive tax rate, your port­fo­lio would need to pro­vide about €47,059 before tax.

$$\text{Gross withdrawal} = \frac{€40{,}000}{1 - 0.15} \approx €47{,}059$$

Ir­reg­u­lar costs de­serve dates too. A €12,000 ren­o­va­tion every 12 years can become a €1,000 annual re­serve, or you can place the full cost in the year you expect to pay it. The second ap­proach shows how the ex­pense in­ter­acts with a market de­cline.

Pen­sions and other income reduce the port­fo­lio gap, but only after they begin. Ana might need €40,000 from her port­fo­lio be­tween ages 50 and 59, then €10,000 after a €18,000 pen­sion begins at 67 and her mort­gage ends. Mul­ti­ply­ing €10,000 by 25 ig­nores the 17-year bridge. Mul­ti­ply­ing €40,000 by 25 ig­nores the later pen­sion.

Choose either real euros through­out or nom­i­nal euros with inflation ap­plied to future cash flows. Do not mix both meth­ods.

Test the return se­quence

A long-run av­er­age return does not arrive in a smooth line. Mar­kets can fall during the first re­tire­ment years and re­cover later. With­drawals make the order matter be­cause assets sold after a fall cannot par­tic­i­pate in the re­cov­ery.

Test a poor first five years sep­a­rately. A plan that sur­vives a smooth 5% return path can fail after an early draw­down even when the long-run av­er­age ends near 5%.

Build the target in six checks

1. Es­ti­mate re­tire­ment spend­ing in to­day’s money and sep­a­rate re­cur­ring costs from large ir­reg­u­lar costs.
2. Add mort­gage end dates, rent changes, planned moves, or other hous­ing shifts.
3. Add pen­sions, benefits, rental income, and later work in the years they begin.
4. Model taxes on the income and with­drawals your ac­counts can pro­duce.
5. Choose a hori­zon that fits your age in­stead of bor­row­ing a 30-year hori­zon by habit.
6. Compare an early re­tire­ment date with later dates and stress-test bad early re­turns.

Fignis can help you com­pare those as­sump­tions with­out forc­ing one fore­cast to carry the whole de­ci­sion. Build a base case, change the re­tire­ment date or pen­sion timing, and com­pare the port­fo­lio paths.

Use €1 mil­lion if it helps you track progress, but keep the as­sump­tions beside it. Write down the re­tire­ment age, spend­ing basis, with­drawal method, pen­sion dates, tax treat­ment, and return sce­nar­ios. Re­cal­cu­late when any of them changes.

Build the wider FI planCon­nect your target with sav­ings, port­fo­lio growth, and the years be­tween finan­cial in­de­pen­dence and later re­tire­ment income.→ Ex­am­ine the with­drawal-rate bench­markSee how 3%, 4%, and 5% start­ing rates change the cap­i­tal target and the risks you take.→