Financial Independence, Retire Early - FIRE - comes down to a single number. The amount of money you need invested before you can stop working.
Get to that number, and your portfolio generates enough to cover your expenses indefinitely. You work because you want to, not because you have to.
Here's how to calculate yours.
The Rule of 25
The most widely used FIRE calculation is the Rule of 25.
Take your annual expenses. Multiply by 25. That's your FIRE number.
If you spend £30,000 per year, your FIRE number is £750,000.
This comes from the 4% Safe Withdrawal Rate - a figure derived from Trinity Study research showing that a portfolio of stocks and bonds could sustain a 4% annual withdrawal indefinitely, across historical market conditions including crashes and recessions.
£750,000 × 4% = £30,000 per year.
What to Include in Annual Expenses
This is where most people get it wrong, by estimating too low.
Include: housing (rent or mortgage payments, council tax, maintenance), food, transport, utilities, subscriptions, clothing, healthcare, holidays, entertainment, irregular expenses averaged over the year.
Do not forget: replacing ageing cars and appliances, home repairs, dental and medical costs that spike in later life, potential care costs, and supporting family members if that applies to you.
The most common FIRE calculation error is using current expenses instead of realistic future expenses.
The Five FIRE Variants
FIRE is not one target - it's a spectrum.
Lean FIRE uses a lower withdrawal rate and a frugal lifestyle. A couple living on £20,000 per year has a Lean FIRE number of £500,000. Lower target, faster to reach, less room for error.
Classic FIRE is the Rule of 25 applied to your current spending. The standard benchmark.
Fat FIRE targets a comfortable or affluent lifestyle in retirement - typically £60,000+ per year in the UK. The number is higher but so is the quality of life.
Coast FIRE is a different concept entirely. Instead of asking "how much do I need now", it asks "how much do I need invested today so that, with no further contributions, it will grow to my FIRE number by retirement age?" If the number has been reached, you only need to earn enough to cover current expenses - your invested money is doing the rest.
Barista FIRE assumes you'll do some part-time work in early retirement - enough to cover basic expenses. The portfolio only needs to cover the gap. Lower target, less full stop on working, more flexibility.
A Worked Example
Age: 32. Annual expenses: £35,000. Target retirement age: 55.
Classic FIRE number: £875,000.
Current portfolio: £120,000. Annual contribution: £18,000. Assumed real return (after inflation): 5%.
At that rate, using compound growth modelling, the portfolio reaches £875,000 in approximately 21 years - at age 53. Two years ahead of target.
Coast FIRE check: how much would need to be invested at 32 so that it grows to £875,000 by 55 with no further contributions? At 5% real return over 23 years, that's approximately £280,000. If the portfolio is already at £280,000, contributions are no longer needed to hit the number - only to cover current expenses.
What FIRE Looks Like in the UK
UK-specific factors change the maths meaningfully.
State Pension: the full new State Pension is currently £11,502.40 per year, available from age 67. For many FIRE planners, this acts as a floor that reduces what the portfolio needs to cover from age 67 onward - which significantly lowers the required FIRE number if you're willing to work the maths.
ISAs and SIPPs: the tax treatment of your drawdown strategy matters. ISA withdrawals are tax-free. SIPP withdrawals are taxed as income. Most UK FIRE planners build a mix - ISA for pre-57 income, SIPP for post-57, State Pension as a backstop.
Running Your Own Numbers
The FIRE Calculator in FinPath Navigator runs all five variants - Classic, Lean, Fat, Coast, and Barista - with UK-specific inputs including State Pension age, ISA and SIPP balances, and real return assumptions. It's on the Pro plan, which is £5/month.
The Honest Caveat
FIRE numbers are projections, not guarantees. Sequence of returns risk - getting bad markets early in retirement - is real. Safe withdrawal rates derived from US historical data may not fully apply to UK portfolios. Most FIRE-retired people maintain some flexibility: a part-time income source, spending variability, or a cash buffer.
The number is a target to aim at, not a guarantee of the finish line.
FinPath Navigator is a personal finance app by Raina Corporation Limited. Available free on Android.