How to Calculate Your FIRE Number (Late Starter Edition)

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title: "How to Calculate Your FIRE Number (Late Starter Edition)" description: "A practical, late-starter friendly guide to calculating your FIRE number with real examples, conservative assumptions, and flexibility strategies for people starting at 35-50." date: "2025-12-09" author: "Jonathan" category: "Calculators" readingTime: "12 min"

I discovered FIRE at 40. Not 22. Not 30. Forty.

When I started running the numbers, every calculator and blog post seemed written for someone who had decades of compound growth ahead of them. The advice assumed I'd have 30+ years to ride out market crashes and benefit from exponential growth.

But here's the thing: if you're starting FIRE at 35, 40, or even 50, the math does work — you just need to be more precise, more conservative, and more strategic about it.

This post walks through exactly how to calculate your FIRE number when you're starting later, with real examples, conservative assumptions, and the flexibility strategies that actually matter when time isn't on your side.

What Is Your FIRE Number?

Your FIRE number is the total portfolio value you need to sustain your annual spending indefinitely without working. It's based on the concept that you can safely withdraw a percentage of your portfolio each year without running out of money.

The classic formula:

FIRE Number = Annual Spending × 25

This assumes the "4% rule" — withdraw 4% of your portfolio in Year 1, adjust for inflation each year, and historically your money lasts 30+ years.

The late-starter reality:

When you're starting at 40, you have less time for compound growth and potentially less time before you need the money. That means:

• Shorter accumulation phase (less compounding magic)
• Higher sequence-of-returns risk (a market crash in year 2 of retirement hurts more)
• Need for more conservative withdrawal rates

I use a 22-23× multiplier (4.3-4.5% withdrawal rate) instead of 25×. It's more conservative, but it gives me peace of mind.

Why the 4% Rule Needs Adjusting for Late Starters

The original 4% rule comes from the Trinity Study, which analyzed rolling 30-year periods from 1926-1995. Key findings:

• A 50/50 stock/bond portfolio with 4% withdrawals had a 96% success rate over 30 years
• A 75/25 portfolio had a 98% success rate
• Higher withdrawal rates (5%+) had significantly lower success rates

What the study doesn't account for:

1. Sequence of returns risk: If you retire right before a major crash (2008, 2022), early losses compound negatively
2. Shorter time horizons: If you're retiring at 50-55 instead of 65, you need your money to last 40-50 years, not 30
3. Healthcare costs pre-Medicare: If you're retiring before 65, healthcare is your single biggest wildcard expense

My approach as a 40-year-old:

I model multiple scenarios:

• Optimistic: 4% withdrawal rate (25× multiplier)
• Realistic: 4.3% withdrawal rate (23× multiplier)
• Conservative: 4.5% withdrawal rate (22× multiplier)

Then I aim for the conservative number and celebrate if I hit the realistic one early.

Step 1: Calculate Your True Annual Spending

This is where most people screw up. They underestimate.

When I first calculated my spending, I thought I spent about $45,000 per year. Then I actually tracked every dollar for 12 months and realized it was closer to $58,000 when I included:

• Irregular expenses (annual property tax, insurance premiums)
• Business expenses I was treating as "separate" but still needed to live
• One-time costs that happen every year (car repairs, home maintenance, tech upgrades)

Here's how to get an accurate number:

Method 1: The Detailed Tracking Method (Most Accurate)

1. Export 12 months of transactions from all bank accounts and credit cards

2. Categorize everything into major buckets:

   • Housing (mortgage/rent, insurance, property tax, HOA, maintenance)
   • Utilities (electric, gas, water, internet, phone)
   • Transportation (car payment, insurance, gas, maintenance, registration)
   • Food (groceries, restaurants, coffee)
   • Healthcare (insurance premiums, copays, prescriptions, HSA contributions)
   • Insurance (life, disability, umbrella)
   • Debt payments (if any)
   • Discretionary (entertainment, hobbies, subscriptions, travel)
   • Irregular (gifts, annual memberships, taxes)

3. Add it all up and divide by 12 to get true monthly average

Method 2: The Quick Estimate Method

If you don't want to track everything:

1. Take total annual income
2. Subtract total annual savings/investments
3. Subtract taxes paid
4. What's left = annual spending

This method tends to underestimate because people forget cash transactions and irregular expenses, so add 10-15% buffer.

Real Example: My Spending Breakdown (40-year-old business owner, single, homeowner)

| Category | Monthly | Annual | |----------|---------|--------| | Housing (mortgage, insurance, property tax, HOA) | $2,100 | $25,200 | | Utilities (electric, gas, water, internet, phone) | $350 | $4,200 | | Transportation (car insurance, gas, maintenance, registration) | $450 | $5,400 | | Food (groceries + eating out) | $700 | $8,400 | | Healthcare (insurance premium, copays, prescriptions) | $650 | $7,800 | | Insurance (life, disability, umbrella) | $200 | $2,400 | | Business Expenses (tools, equipment, licenses) | $400 | $4,800 | | Discretionary (hobbies, travel, entertainment, subscriptions) | $600 | $7,200 | | Irregular (gifts, annual fees, unexpected costs) | $300 | $3,600 | | TOTAL | $5,750 | $69,000 |

That's my actual number. Yours will be different based on location, lifestyle, dependents, and whether you own or rent.

Key insight: I can cut this to about $52,000 if needed by eliminating discretionary spending and optimizing housing. That flexibility matters.

Step 2: Choose Your Withdrawal Rate & Calculate Your Number

Now that you know your annual spending, pick your withdrawal rate based on your risk tolerance and time horizon.

Withdrawal Rate Decision Matrix

| Your Situation | Recommended Rate | Multiplier | Risk Level | |----------------|------------------|------------|------------| | Age 35-40, aggressive timeline | 4.5% | 22× | Higher risk | | Age 40-45, balanced approach | 4.3% | 23× | Moderate | | Age 45-50, conservative | 4.0% | 25× | Lower risk | | Age 50+, very conservative | 3.5% | 28-29× | Lowest risk |

My calculation (age 40, moderate risk tolerance):

Annual spending: $69,000
Withdrawal rate: 4.3%
Multiplier: 23×

FIRE Number = $69,000 × 23 = $1,587,000

That's my target. It's daunting, but breaking it down into yearly milestones makes it manageable.

Alternative: The "Lean FIRE" Number

If I cut my spending to $52,000 (eliminate travel, reduce discretionary, optimize housing):

Lean FIRE Number = $52,000 × 23 = $1,196,000

That's nearly $400K less. This is why tracking actual spending matters — you can model different lifestyle scenarios.

Step 3: Model Your Timeline (The Part Everyone Skips)

Knowing your FIRE number is useless without knowing when you'll hit it. This requires three inputs:

1. Current portfolio value (all invested assets: 401k, IRA, taxable brokerage, HSA)
2. Annual savings rate (how much you're investing per year after taxes)
3. Expected return (be realistic: 6-7% nominal, 4-5% real after inflation)

The Formula (Future Value with Regular Contributions)

FV = PV × (1 + r)^n + PMT × [((1 + r)^n - 1) / r]

Where:

• FV = Future Value (your FIRE number)
• PV = Present Value (current portfolio)
• r = annual return rate
• n = number of years
• PMT = annual contribution

You can solve for n (years to FIRE) if you know everything else.

Real Scenario: My Actual Numbers

• Current portfolio: $285,000 (mix of Roth IRA, taxable brokerage, SEP IRA)
• Annual savings: $45,000 (maxing SEP IRA + taxable brokerage contributions)
• Expected return: 6% nominal (conservative for 80/20 stock/bond allocation)
• Target: $1,587,000

Plugging into the formula:

Using a financial calculator or spreadsheet (Excel's NPER function):

Years to FIRE ≈ 13.2 years

So if I maintain $45K/year contributions at 6% returns, I hit my number around age 53.

But what if the market tanks?

Let's run pessimistic scenarios:

| Scenario | Return | Years to FIRE | |----------|--------|---------------| | Optimistic | 8% | 11.3 years | | Realistic | 6% | 13.2 years | | Pessimistic | 4% | 16.1 years |

Even in a lousy market (4% real returns), I'm still retiring by 56. That's the power of high savings rates when you're starting late.

Step 4: Account for Healthcare (The Late-Starter Wild Card)

If you're retiring before 65, healthcare is your biggest unknown expense. Here's what I learned researching this:

Healthcare Cost Estimates (Pre-Medicare)

Marketplace (ACA) Plans:

• Individual: $400-$800/month ($4,800-$9,600/year) depending on subsidies
• Family: $1,200-$2,000/month ($14,400-$24,000/year)

If your FIRE income is low enough, you may qualify for premium tax credits. But if you have significant capital gains or Roth conversions, you could lose subsidies.

Healthcare Sharing Ministries:

• $200-$400/month for individuals
• Not insurance; works for healthy people but risky

My plan:

I'm budgeting $8,000/year for healthcare ($667/month) and keeping a $25,000 healthcare emergency fund separate from my FIRE number. If I can get ACA subsidies by managing my taxable income (more Roth, less taxable distributions), I'll come in under budget.

Pro tip: Model your FIRE spending to keep Modified Adjusted Gross Income (MAGI) under 400% of federal poverty level to qualify for ACA subsidies. For 2025, that's roughly $60,000 for a single person.

Step 5: Build Flexibility Into Your Plan (Hybrid FIRE Strategies)

Here's the honest truth: retiring at 40-50 with zero income is risky. Markets crash. Inflation spikes. Life happens.

Hybrid strategies that reduce risk:

1. Barista FIRE

Work part-time (15-20 hours/week) to cover healthcare and essentials. Let your portfolio grow untouched.

My version: I plan to keep taking small roofing projects ($15-20K/year) even after hitting my FIRE number. It covers healthcare and gives me something to do.

2. Coast FIRE

Save aggressively until your portfolio can grow to your FIRE number without additional contributions, then ease off the gas.

Example: If I hit $800K by age 47 and stop contributing, it grows to $1,587,000 by age 60 at 6% returns. I "coast" from 47-60 working part-time.

3. Partial FIRE

Build a portfolio that covers essential expenses (housing, food, healthcare), then work optional income for discretionary spending.

My essential expenses: $42,000/year
Portfolio needed (23× multiplier): $966,000

That's $621,000 less than my full FIRE number. I could hit that by age 47 and have the option to semi-retire.

Step 6: Tax Optimization (The Late-Starter Accelerator)

When you're starting late, every dollar you save on taxes compounds faster. Here's what's working for me:

Max Out Tax-Advantaged Accounts First

For self-employed (like me):

• Solo 401(k): $23,000 employee + 25% of net SE income employer (2024 limits)
• SEP IRA: Up to 25% of net SE income, $69,000 max
• HSA: $4,150 (single), $8,300 (family) — triple tax advantage

For W-2 employees:

• 401(k): $23,000 (2024)
• IRA: $7,000 ($8,000 if 50+)
• HSA: Same as above

My strategy:

I max my SEP IRA ($69,000 in good years), HSA ($4,150), and dump the rest in taxable brokerage. The tax savings accelerate my timeline by 1-2 years.

Roth Conversion Ladder Strategy

If you're retiring early, you'll need to access retirement funds before 59½. The Roth conversion ladder lets you do this penalty-free:

1. Convert Traditional IRA/401(k) to Roth IRA
2. Wait 5 years
3. Withdraw converted principal tax- and penalty-free

Example:
At age 50, convert $40,000 from Traditional to Roth. Pay taxes on the $40,000 that year. At age 55, withdraw that $40,000 from Roth penalty-free.

I plan to start conversions in my late 40s during low-income years to minimize taxes.

Real-World Scenarios: What Your Numbers Might Look Like

Scenario A: Age 35, Dual Income, No Kids

• Current portfolio: $150,000
• Annual spending: $60,000
• Annual savings: $50,000
• FIRE number: $1,380,000 (23×)
• Expected return: 6%
• Years to FIRE: 11.5 years (FIRE at 46-47)

Scenario B: Age 40, Single, Self-Employed

• Current portfolio: $200,000
• Annual spending: $55,000
• Annual savings: $35,000
• FIRE number: $1,265,000 (23×)
• Expected return: 6%
• Years to FIRE: 14 years (FIRE at 54)

Scenario C: Age 45, Single Parent

• Current portfolio: $120,000
• Annual spending: $70,000
• Annual savings: $25,000
• FIRE number: $1,610,000 (23×)
• Expected return: 6%
• Years to FIRE: 22 years (FIRE at 67)

Scenario C insight: This person might pivot to Coast FIRE or Barista FIRE instead of traditional FIRE to retire earlier.

Common Mistakes Late Starters Make

1. Underestimating Healthcare Costs

Budget $6,000-$10,000/year minimum if retiring before Medicare kicks in.

2. Using Too Aggressive Withdrawal Rates

5%+ withdrawal rates have high failure rates. Stick to 4-4.5% max.

3. Forgetting About Inflation

Your FIRE number needs to account for inflation. If you're retiring in 10 years, multiply your current spending by 1.3× (assuming 2.5% inflation).

4. Not Building Flexibility

Have backup plans: part-time work, rental income, side hustles. Don't bet everything on a single number.

5. Ignoring Taxes in Retirement

Roth vs. Traditional, capital gains, RMDs — these all affect your sustainable withdrawal rate. Plan accordingly.

My Take: What I'm Actually Doing

I'm 40. I have $285K invested. I'm saving $45K/year. My FIRE number is $1.587M.

My plan:

• Hit $800K by 47 (Coast FIRE milestone)
• Hit $1.2M by 51 (Lean FIRE milestone)
• Hit $1.587M by 53 (Full FIRE)

But here's the real plan:

I'll probably semi-retire around 51-52 when I hit my Lean FIRE number. I'll keep taking small roofing projects I enjoy, maybe build another business, and let my portfolio keep growing. By 60, I'll have way more than I need and can decide what to do with the surplus (give it away, help family, build something cool).

Starting late doesn't mean you can't FIRE. It means you need to be smarter, more intentional, and more flexible about what FIRE looks like for you.

Action Steps

1. Track your spending for 3 months minimum (ideally 12 months). Use Mint, YNAB, or a spreadsheet.
2. Calculate your FIRE number using a 22-23× multiplier (more conservative for late starters).
3. Run multiple scenarios with different return rates (4%, 6%, 8%) to see your range of outcomes.
4. Identify your Coast FIRE and Lean FIRE milestones — these are psychological wins along the way.
5. Max out tax-advantaged accounts — SEP/Solo 401(k) if self-employed, 401(k)+IRA if W-2.
6. Build healthcare buffer — separate $20-30K emergency fund for pre-Medicare healthcare.

Related Resources

• Solo 401(k) Guide for Self-Employed FIRE Seekers — How I'm maxing tax-advantaged contributions
• Coast FIRE Calculator — Calculate when you can stop contributing
• Roth vs Traditional IRA for FIRE at 40 — Tax optimization strategies

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Disclaimer: I'm not a financial advisor, CPA, or investment professional. I'm a 40-year-old roofing business owner figuring this out in real-time. This post shares my research and personal strategy, but everyone's situation is different. Consult qualified professionals before making major financial decisions. For full legal disclaimers, see our disclaimer page.