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For adherents to the financial independence, retire early , or FIRE, movement, that figure is much more concrete. “Your FIRE number is the amount of money you need to live on for the rest of your life,” says Grant Sabatier , creator of financial site Millennial Money and the author of “Financial Freedom.”
For many aspiring early retirees, calculating that number comes with an easy shorthand: “The way you calculate your FIRE number is multiplying your expected annual expenses by 25x,” says Sabatier, who reached financial independence at 30 . “Meaning if you spend $40,000 a year, multiplying that $40,000 by 25 would get you to a million dollars.”
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As with any other one-step financial calculation, the FIRE number math is based on several assumptions and will vary based on your financial situation. Here’s what retirement experts say you need to know to figure out how much money you’ll need to retire.
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The FIRE number calculation is rooted in the so-called “4% rule,” which was popularized in an influential 1998 research report known as the “Trinity study.” Included in the research was an examination of past market performance to determine a safe withdrawal rate in retirement.
The conclus...
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As Sabatier points out, some more recent studies suggest it may be wiser to aim for a lower withdrawal rate if you’re hoping for an extended retirement. Researchers at Morningstar p...
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How much money would you need to retire today and never have to work again?
If you’re planning to retire at 65, that figure may seem distant and amorphous. You’re saving as much as you can today so that you can enjoy life as much as possible when you eventually leave your job.
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Be prepared for retirement with this simple formula
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Other curated ideas on this topic:
A good early retirement strategy is built on maximizing three aspects: Income, expenses, and savings.
To build your early retirement strategy, you need to determine your retire early or financial independence (FI) number. It is the amount of money you need for work...
Your net worth is the total value of all your assets, minus all of your liabilities.
It is important to know your net worth so you can calculate how much progress you're making and how close you are to financial independence. Banks and investment advisors ...
Based on a series of papers known as the Trinity Studies, you need to save 25-30 times your expected annual expenses to have enough money to last you for the rest of your life.
This multiple is based on the percentage of your investment growth that you would be able to wit...
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