What is FIRE?
FIRE stands for Financial Independence, Retire Early. The goal is to accumulate enough invested assets that the returns alone can fund your lifestyle indefinitely, making paid work optional. In Australia, the FIRE movement has grown rapidly as property-owning millennials look beyond the traditional retirement age of 65–67.
The FIRE number formula
Your FIRE number is the investment portfolio value needed to retire:
Example: $80,000 annual expenses ÷ 4% = $2,000,000 FIRE number
Example: $60,000 annual expenses ÷ 3.5% = $1,714,286 FIRE number
The withdrawal rate is the percentage of your portfolio you withdraw each year. At 4%, a $2M portfolio generates $80,000/year, and historically, the portfolio itself continues to grow, meaning it lasts indefinitely under most market scenarios.
The 4% rule: Australian caveats
The 4% rule comes from the Trinity Study (1998), which found that a portfolio of 50–75% equities with a 4% withdrawal rate survived all rolling 30-year periods in US market history from 1926–1995.
For Australian FIRE planners, some adjustments are worth considering:
- Longer retirement horizon: retiring at 40 means a 50+ year retirement, not 30. Many Australian FIRE planners use 3.5% for extra margin.
- Superannuation: if you retire before 60, you can't access super until preservation age. Your pre-60 FIRE number may be higher than the total number including super.
- Australian market concentration: the ASX 200 is heavily weighted to banks and resources. A globally diversified portfolio may reduce sequence-of-returns risk.
- Franking credits: Australian dividend imputation returns effective yield from franked dividends, which can effectively boost withdrawal capacity from Australian equity holdings.
How to use the FIRE Calculator in PortWorth
- Go to Analysis → Performance, find the Simulation Lab panel and click FIRE Calculator.
- Enter Annual Expenses: what you would spend per year in retirement. Use your current spending as the baseline, then adjust for expected lifestyle changes (no commuting costs, but potentially more travel).
- Set the Withdrawal Rate. Default is 4%. Use 3.5% for conservative planning or 4.5% if you are willing to adjust spending in bad market years.
- Review your FIRE number. PortWorth shows what you have counted so far as a percentage of it, and how much is left to go. Underneath, the same spending is priced at 4%, 3.5% and 3% — the withdrawal rate is the single assumption that moves this number most.
- Enter Monthly Savings: how much you invest each month above living expenses.
- Set Real Return. Enter the return you expect after inflation, and every figure stays in today’s dollars. Historical ASX 200 total return is roughly 9–10% before inflation; many planners use 5–7% in real terms for conservative projections.
- Read the projection: PortWorth shows the years to your FIRE number, roughly which calendar year that is, and your age when you get there if you entered one. The chart draws the path against the target line.
- Optionally enter your age. Without it the projection still works; with it, PortWorth can tell you whether you would reach FIRE before super becomes accessible.
Super in the FIRE calculation
Tick or untick Count super toward the target to control whether superannuation is included in your "current portfolio" figure for the FIRE calculation:
- Excluded: counts only what you could actually reach — your investment accounts and cash. This is your "bridge" requirement: what has to fund the years before super preservation age, which is 60 for anyone born from 1 July 1964.
- Included: shows total FIRE readiness including super, relevant for planning from age 60. If you entered an age and the projection lands before 60, PortWorth flags that the super counted cannot yet be drawn.
Many Australian FIRE planners track both numbers. The gap between them is the "super gap" that must be bridged by accessible assets during early retirement, and PortWorth names it explicitly when it applies to you.
Levers that move your FIRE date
| Action | Effect |
|---|---|
| Reduce annual expenses by $10,000 | FIRE number drops by $250,000 (at 4%) |
| Increase monthly savings by $500 | Significant; varies by current portfolio and return |
| Increase expected return by 1% | Can move FIRE date forward 2–4 years |
| Lower withdrawal rate from 4% to 3.5% | FIRE number increases by ~14% |
| Include property equity | Can dramatically close the gap if you plan to downsize |
Frequently asked questions
Does the FIRE calculator account for inflation?
The calculator asks for a real return, so if you enter one net of inflation every figure it shows is in today’s dollars. To get a real (inflation-adjusted) projection, enter your expected return minus expected inflation (e.g. 9% return − 3% inflation = 6% real return). The 4% rule itself was derived from real (inflation-adjusted) returns in the original Trinity Study.
What about the Age Pension?
The Age Pension (currently starting at 67) is not included in the FIRE calculation by default. If you plan to rely partly on the Age Pension, you can reduce your FIRE number by the expected annual pension entitlement. Note that means-tested pension thresholds may make FIRE wealth incompatible with pension eligibility.
Can I run a Monte Carlo simulation on my FIRE projection?
Yes. The Monte Carlo simulation on the Performance tab lets you run thousands of randomised return paths using your expected return and volatility. It shows the probability distribution of portfolio values over time, far more realistic than a single-rate linear projection. See the Portfolio Simulations guide.