- What is the 4% rule?
- The 4% rule (also called the safe withdrawal rate) suggests you can withdraw 4% of your portfolio in year one of retirement and adjust for inflation each year, with a high probability of the portfolio lasting 30 years. It is based on historical US stock and bond returns studied by William Bengen in 1994.
- How is the FIRE number calculated?
- FIRE Number = Annual Expenses / Safe Withdrawal Rate. At a 4% SWR, that is Annual Expenses × 25. If you spend $60,000 per year, your FIRE number is $1,500,000. Lowering your withdrawal rate (e.g. to 3.5%) increases the required savings but improves longevity.
- Is the 4% rule still valid?
- It remains a widely used benchmark, though some researchers argue that current low bond yields and high valuations suggest a more conservative 3–3.5% rate for early retirees with 40+ year horizons. A higher equity allocation and flexibility to reduce spending in down markets improves the odds.
- What is "lean FIRE" vs "fat FIRE"?
- Lean FIRE means retiring on minimal expenses, often under $40,000 per year. Fat FIRE targets a comfortable or affluent lifestyle, typically $100,000+ per year. Barista FIRE involves retiring from full-time work but keeping a part-time job for health insurance or supplemental income.
