Your FIRE number, for real this time

The lesson on what retirement actually means introduced the idea that retirement is a number rather than an age: the point at which what you own produces enough to live on, whether or not you keep working. It was deliberately conceptual, because you did not yet have savings rates, returns, compounding, super or any of the tools.

You have all of it now. So here is the same idea with real arithmetic attached, using the two people you have been following from the start.

Where the number comes from

In 1994, financial adviser William Bengen tested historical market data to find the largest percentage of a portfolio someone could withdraw in year one of retirement, rising with inflation each year after, without running out over thirty years. The answer was about 4%, holding up across every rolling thirty-year period he tested, including retirements that began right before major crashes. A later study by three Trinity University professors confirmed similar results, and the shorthand stuck.

Invert 4% and you get the famous multiplier. If you can withdraw 4% a year, the portfolio you need is 25 times your annual spending. This is the safe withdrawal rate, and the whole of FIRE (financial independence, retire early) is built on it.

Note what the multiplier attaches to. Not your income. Your spending. Which means there are two levers on your FIRE number and the one nobody wants to hear about is the more powerful of the two, because reducing annual spending by a dollar lowers the target by twenty five.

The two numbers

Both Zaid and Amina earn $80,000 gross and $63,880 net. From the lesson on where your money actually goes:

A $2,000 difference in annual spending moves the target by $50,000 before a single dollar is invested. That is the multiplier working in the direction people ignore.

The first pass: 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.

That is the simplest possible answer, and it is also not quite right for Australia, because it assumes you can spend the combined total the moment it crosses the line. You cannot. Super stays locked until 60 regardless of what the total says.

How long it actually takes

Running their established contributions at their established returns until each crosses their own target:

The savings rate lesson resolved the Zaid and Amina comparison and this lesson does not reopen it. Both are modelled at the same ordinary 10% here, because that is the assumption that holds everywhere else. What this table adds is what those trajectories mean in years of your life rather than in dollars on a chart.

Amina saves $2,000 a year more and spends $2,000 a year less than Zaid, and it buys her three years. Not three years of extra money. Three years of not having to work.

The part the internet leaves out

Amina reaches financial independence at 55. Preservation age (the age you can legally access super) is 60.

Sit with that, because it reframes the whole exercise. Neither of these people, on ordinary Australian incomes and genuinely good habits, retires at 40. They reach independence five years before the superannuation system was going to release them anyway.

And that is before counting super at all. Amina's employer contributions alone, roughly $8,160 a year after contributions tax, growing at 7% net of fees, reach $824,756 by 60 if she keeps working until then. She never chose to make those contributions and has never thought about them.

So the real picture is not one portfolio hitting a target. It is two, arriving at different times:

• The accessible portfolio has to cover everything from the day you stop working until 60. It is doing the hard work, because it is the only one available in that window.
• Super arrives at 60 as a second portfolio, and it only has to cover from 60 onward.

This is why the American 25x rule needs translating rather than importing. It assumes one portfolio funding a whole retirement. The Australian structure is a locked account that unlocks at 60, and a personal portfolio that has to bridge to it. Bridging five years to 60 is a much smaller problem than funding fifty years from 45, and it means a straight 25x is conservative for an Australian retiring in their fifties and insufficient for one retiring in their thirties.

The bridge, worked through

Here is what that structure does to Amina's date. The moment she stops work, two things change. Her employer contributions stop, so super grows on its own at 7% until 60. And her accessible portfolio starts paying her $51,880 a year while it keeps compounding at 10%. The test has two parts: the accessible portfolio must never run dry before 60, and at 60, what is left of it plus super must be at least 25 times her spending, $1,297,000.

On these assumptions Amina passes the test at 48, seven years before the plain 25x rule says she is done. The plain rule is not wrong. It answers a different question: can one portfolio fund her whole life? The Australian question is narrower. Can one portfolio get her to 60?

Two honest caveats. The 48 row leans hard on the bridge years going roughly to plan. Twelve years of withdrawals from $601,909 is exactly the situation where a crash early on does real damage, because she is selling into it. And super stops receiving contributions the day she stops work, which is why her balance at 60 is $668,568 on that row, not the $824,756 she would have by working through. Read the table as a range: somewhere between 48 and 55, with the margin for error shrinking the earlier she goes.

For an Australian in their fifties, 25x is the cautious end of the answer, not the minimum.

What actually moves the date

Both levers, run against Amina's baseline of 25 years. Her $12,000 a year would sit between the first two rows:

Every row below starts from $0, compounds at 10%, and runs until it reaches Amina's $1,297,000 target. Only the annual contribution changes.

Look at the right-hand column, because it is the whole point of the table. The first extra $5,000 a year buys you four years. Every extra $5,000 after that buys two. You have tripled your contribution from $10,000 to $30,000, which for most people means a materially different life, and it has bought ten years off a twenty-seven year timeline rather than the eighteen you might have expected.

The reason is that contributions and time do not work the same way. Contributions add. Compounding multiplies. Past a certain point the portfolio's own growth is larger than anything you can put into it, and from there the dominant variable is how long it is left alone, not how hard you feed it.

Two things stand out. Each extra dollar buys less time than the one before it, because compounding needs time and the last years of a portfolio are by far its biggest. And cutting spending helps twice over, lowering the target and raising the contribution at the same time, which is why every increase in the gap between earning and spending is worth more than it first appears.

What is not on this table is a higher return, because you do not control it. The savings rate lesson dealt with the exaggerated return, which is a marketing claim rather than an input. Savings rate is the lever you own.

What the number is actually for

It would be easy to read the table above as disappointing. 55 is not the promise that gets made online.

But financial independence is not a switch that flips at 25 years and does nothing before then. Every year of that trajectory buys something real, and the arrival date is the least interesting part of it.

• Year 3, $43,692. A job loss is now an inconvenience with a deadline, not an emergency. You can refuse work you should refuse.
• Year 8, $150,954. More than two years of spending. Career changes, study, a business attempt, or a year off become things you can choose rather than things you rule out.
• Year 15, $419,397. Returns in an average year are now more than three times what you contribute. The portfolio is doing more of the work than you are.
• Year 20, $756,030. Part-time work covers the gap. Full independence is optional rather than required, and the difference between four days and five is now yours to set.
• Year 25, $1,297,000. Work becomes a choice. Which was the point, and which arrived progressively rather than all at once.

The lesson on what retirement actually means said retirement is a number rather than an age. The honest completion of that thought is that it is a gradient rather than a number. The date on the spreadsheet is when the gradient reaches the top, and most of what you actually wanted was available well before it.

Run your own version in the growth calculator. You need two figures: what you spend in a year, multiplied by 25, and what you can invest in a year. That is the entire calculation, and it is the one most people never do.

The savings rate table: what your gap is actually worth

Everything above is specific to two people. Here is the general version, and it is the single most useful table here because you can find yourself in it.

The assumptions, stated plainly so you can disagree with them: you start at 25 with nothing, you earn a 10% return, contributions are made at the start of each year, and you stop when your portfolio reaches 25 times your target retirement spending, which is the 4% safe withdrawal rate (the share of a portfolio you can draw each year without running out) used throughout this lesson. Income is held flat in real terms, and super is ignored entirely, which makes every row below conservative for an Australian.

Three tables, because "how much do I need" depends on what you intend to live on. The first assumes you want to replace 100% of what you currently spend. The second assumes 75%, which is realistic for most people once the mortgage is gone and the children have left. The third assumes 50%, which is the lean version.

If you want 100% of your current spending in retirement

If you want 75% of your current spending in retirement

If you want 50% of your current spending in retirement

Find your row. Three things tend to land at once.

• Your income is not in the table. Nowhere in that calculation does your salary appear. A 20% savings rate gets you there in 25 years whether you earn $60,000 or $600,000, because a higher income raises the pile and the target in the same proportion. This is the arithmetic behind everything said so far about the gap mattering more than the number. It also answers the pay-rise question: a raise spent in full does not move your date at all, and a raise that lifts your spending faster than your saving moves it later. Only the captured share counts, which is what lifestyle inflation is about.
• The early rows are brutal and the middle rows are not. Going from 5% to 15% takes twelve years off. Going from 50% to 60% takes three. The most valuable improvement available to almost everyone is the one from a low savings rate to an ordinary one, not the heroic one from an ordinary rate to an extreme one.
• Nobody in this table retires at 40 on a 10% savings rate. If you have read otherwise online, the missing ingredient was usually a very high income, a very low target, or an inheritance.

And one Australian correction that applies to every row: these numbers ignore superannuation entirely. Your employer contributions are compounding alongside all of this in an account you cannot touch until 60. So the real picture for an Australian is that the table above is the bridge, and super is what arrives once you cross it, which is why the 25x target is conservative for anyone independent in their fifties and genuinely insufficient for anyone aiming at their thirties.