Your FIRE (Financial Independence, Retire Early) number

Everything so far has been habits. This lesson is the number they are aiming at. One note before the numbers: the last lesson used $5,000 and $7,000 to make a point about savings rate. From here on, we go back to what Zaid invests everywhere else, $10,000 a year, and what Amina invests, $12,000 a year.

Where the number comes from

In 1994, an American financial adviser named William Bengen asked a simple question: how much can a retiree withdraw each year without running out of money? He tested every thirty year stretch in the historical data, including retirements that began right before major crashes. The answer was about 4% of the portfolio in the first year, rising with inflation after that.

Invert 4% and you get the famous multiplier. If you can safely withdraw 4% a year, the portfolio you need is 25 times your annual spending. That is the safe withdrawal rate (the share of a portfolio you can draw each year without running out), and the whole FIRE movement is built on it.

The two numbers

A $2,000 difference in annual spending moves the target by $50,000 before a single dollar is invested.

Counting the whole picture

Zaid and Amina both earn $80,000, so both receive identical employer super contributions: 12% of gross income, taxed at 15% going in, which lands roughly $8,160 in super every year. Growing at an ordinary 7% net of fees, that builds a serious balance in the background, one neither of them has to think about.

Their FIRE number doesn't care where the money sits. It is a test of total wealth, so the honest way to track their progress is super and outside super investments added together, both compounding at once.

Amina crosses her $1,297,000 target around year 22, at age 52. Zaid crosses his $1,347,000 target around year 24, at age 54. She saves $2,000 a year more and spends $2,000 a year less, and it buys her roughly two years.

These figures assume neither of them ever receives a pay rise across a 30 year career. That is a deliberately conservative and frankly unrealistic assumption, since most incomes grow over time. A higher income means higher super contributions, larger balances and different numbers throughout. Working out your own real trajectory, with actual income growth and your specific circumstances, is exactly what the in-depth course walks you through.

It is a gradient, not a switch

Retiring at 52 is not the number that gets promised online, and it would be easy to read the table above as underwhelming. But financial independence is not a switch that flips at year 22 and does nothing before then. Every year of the journey, investments and super combined, buys something real.

• Year 8, total $240,534 (Amina). That is well over four years of total expenses, already covered. A career change, further study, a business attempt or a year off stop being fantasies and become things you can choose.
• Year 15, total $638,803 (Amina). Nearly half the target. Returns are now doing meaningful work alongside contributions.
• Year 20, total $1,113,970 (Amina). More than 85% of the way there, with the finish line in view.
• Year 22, total $1,370,395 (Amina). Target reached. Work becomes a choice, which was the point, and which arrived gradually rather than all at once.

One thing this example has been quietly ignoring

Everything above adds super and outside super investments into a single total. In reality, they don't behave the same way. The super balance (over $400,000 for both of them by the time they cross their FIRE number) isn't reachable until they turn 60, the current preservation age, no matter how early their combined total crosses the line.

That means the outside super portion has to be looked at on its own, because it is the money that must fund every year between the day they stop working and the day super finally opens up. When Amina "reaches financial independence" at 52, her accessible investments ($942,516) are all she can use, and they have to last her until she can access super at 60.

That is a materially different planning problem to the one this lesson has simplified, and it is exactly what the in-depth course walks through in detail: how to bridge the years before super arrives, using your own numbers rather than Zaid and Amina's.