Why your FIRE number may be wrong?

Over the past decade, the FIRE number has gained massive popularity!

Simply put, the FIRE (Financial Independence, Retire Early) number is the amount you need to save to retire comfortably. You might have come across  a lot of wealth advisors and finance gurus using it to scare you—making you feel like you’ll never have enough to retire.

But is it really as haunting as they make it sound? Let’s find out!

How does FIRE number work?

Your FIRE number (Financial Independence, Retire Early) is the amount you need to retire comfortably. It works on the 4% rule, which suggests you can withdraw 4% of your investments annually without running out of money.

How is the FIRE number calculated?

Well, if you just search on the internet you’ll probably come across a ton of FIRE number calculators, but we need to understand how it’s calculated in order to understand the basic flaw in this concept.

By the way—there are 4 types FIRE numbers, so lets break each of them down with an example:

Rahul’s Details
‍
Monthly Income: 66,666
Annual Income: 20 Lakhs
Age: 30 Years
Annual Basic Expense: 8 Lakhs
Inflation: 6%
Planned Retirement Age: 50 Years

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Lean FIRE

Lean Fire Number is the amount at which you can comfortably retire, if you are willing to cut back a little on your current lifestyle.

Formula

Annual Expenses (adjusted for inflation for the Planned age) x 15

For Rahul 

Basic Annual expenses after 20 Years (@ 6%): ₹25,65,708

Lean FIRE number= ₹3,84,85,620 (₹25,65,708 x 15 )

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Normal FIRE

This is the amount you’d need to retire with, if you want to keep up with your current lifestyle, but remember you still cannot exceed it.

Formula

Annual Expenses (adjusted for inflation for the Planned age) x 25

For Rahul 

Basic Annual expenses after 20 Years (@ 6%): ₹25,65,708

Normal FIRE number= ₹6,41,42,700 (₹25,65,708 x 25 )

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Fat FIRE

This is your desired corpus value for retirement if you want to live your life king size (spending 2X on your basic expenses as compared to right now)

Formula

Annual Expenses (adjusted for inflation for the Planned age) x 50

For Rahul 

Basic Annual expenses after 20 Years (@ 6%): ₹25,65,708 ‍

Fat fire number=  ₹12,82,85,400 ( ₹25,65,708 x 50 )

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Coast FIRE

This is the amount you need to have invested today so that you can grow your investment to the value of corpus required under Lean Fire Number by the time you want to retire.

While there’s no fixed formula for calculating this number, the basic flaw is that you already need to have this amount with you or else you cannot work with the Coast FIRE number.

Why is it wrong?

If you think about it, the traditional FIRE calculation assumes you start retirement, withdraw a fixed 4% every year, and watch your corpus shrink until it is gone after 25 years.

But life does not stop after 25 years. There could be medical emergencies, big family events, or even just the desire to spend more in certain years. Why would you park ₹6.4 Cr. in a way that it simply depletes, instead of letting it keep working for you?

How much would you actually need?

This is where a smarter approach comes in, instead of eating into your corpus, live off the returns it generates.

Even conservative, low-risk mutual funds or a well-balanced portfolio of equity, debt, and fixed deposits can reasonably target a 7% average annual return over the long term.

Calculation:

That is already ₹2.1 Cr. less than the “Normal FIRE” number. The key difference is that your principal stays intact and can even grow over time.

So how much does Rahul need?

As per his needs, Rahul just needs to invest ~25% off his income for the next 20 Years to retire peacefully.

Or he can opt for a smarter SIP strategy where-in he’d add 10% to the investment amount each year. 

Here’s how it’d look:

Now that sounds like something even more achievable right? In this case Rahul just needs to start investing with just 13% of his income and keep on adding 10% each year to reach his goals!

Final Takeaway?

Your FIRE number does not have to be frightening. The classic "25× expenses" and 4% rule are overly rigid, especially in the Indian context.
A better plan is to build a corpus that covers your annual expenses through returns, while keeping your principal safe and growing.

Retirement is not about hoarding a massive pile of cash. It is about smart planning, consistent investing, and letting your money work for you so you can live freely.