Důchod, renta a FIRE
How Much Do You Need for Financial Independence: Calculating Your FIRE Number
Key takeaways
- FIRE number = annual expenses × 25 at a 4% withdrawal rate.
- For a horizon longer than 30 years, a 3% rate is safer — the number then rises to 33 times your expenses.
- Include recurring one-off costs in your calculation (car, roof, healthcare).
- Inflation erodes the real value of withdrawals — the portfolio must return more than inflation.
- The number is a starting point, not a certainty; real drawdown requires ongoing monitoring.
Your FIRE number is the specific portfolio size at which investment returns cover all your expenses — without needing to work. The calculation is simple, but it hides several pitfalls.
The basic formula
At a 4% annual withdrawal rate you need a portfolio equal to 25 times your annual expenses. Expenses of CZK 500,000/year = FIRE number CZK 12.5 million. Expenses of CZK 800,000/year = CZK 20 million. The formula is based on historical analysis of US markets (Trinity Study, 1998), which showed that a 4% withdrawal statistically sustains a portfolio for 30 years.
Why 30 years is not enough and what to do about it
If you retire at 40, you face a 45–50-year drawdown horizon. Research shows that at a 4% rate over such a long horizon, historical success rates decline. A safer approach is to switch to a 3% withdrawal rate, which raises the FIRE number to 33 times your expenses. Alternatively, plan a combination of portfolio and partial income (part-time work, rental income) in the early years of retirement.
What to include in your expenses
- Regular expenses — rent or mortgage, food, transport, insurance premiums
- Health insurance premiums — mandatory in the Czech Republic even without employment (approx. CZK 3,000/month minimum)
- One-off costs — repairs, car replacement, medical interventions: budget an extra CZK 50,000–100,000/year on average
- Inflation — real expenses will rise; the portfolio must produce a return above inflation
Once you know your number, compare it to your portfolio projection using the projection calculator. For a deeper understanding of the withdrawal rule, read the 4% rule and sequence risk.
FAQ
How do I calculate my FIRE number?
Multiply your annual expenses by 25. With expenses of CZK 600,000 per year, the FIRE number is CZK 15 million. This calculation assumes a 4% withdrawal rate and a 30-year horizon. For longer horizons, use a multiplier of 33.
Why are basic expenses not enough?
You must include health insurance premiums (mandatory even without employment), irregular expenses (car, repairs, healthcare), and inflation. Underestimating expenses is one of the most common mistakes in FIRE planning.
What is the 3% withdrawal rule?
A more conservative variant: you withdraw only 3% per year, and the FIRE number is 33 times your expenses. Suitable for longer horizons (retiring at 40 or earlier), where the 4% rate does not show sufficient historical success.
How long does it take to reach your FIRE number?
It depends on your savings rate and portfolio returns. At a 50% savings rate and 7% annual real return, reaching FIRE takes approximately 17 years. At a 70% rate, just 8–9 years. Every percentage point of savings counts.