A thumb rule for financial independence and early retirement (FIRE) + Android App

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I discuss a simple thumb rule for computing how much money do I require for financial independence and early retirement (FIRE). This also applies to normal retirement. You can also download an Excel sheet and an android app to answer questions like (1) what is the corpus required? (2) How long will a corpus last? (3) How much can I draw from a corpus each year? (4) What is the rate of return required for FIRE? This is the first part of a series of posts analyzing how robust FIRE or normal retirement strategies are. In this post, I shall present the tool and a set of thumb rules and from the next point out their serious limitations.

What is FIRE?

FIRE stands for financial independence and early retirement. Early retirement is a stage in life when you have enough money to draw an inflation-protected income for the rest of your life without having to work anymore. This does not mean one stops working. It only means one need not work for a living. Also early is a loose term. Early could be 35 or 45 or 55 or 65, it is what you say it is.

Financial independence could stand for early retirement or it could mean having enough corpus to not worry about an income for the next 5Y or 10Y until we pursue a new degree, a new startup etc. Obviously, if FI is sought only for a few years, a much lower corpus would be required than for early retirement.

It is crucial to understand that the mathematics of planning for normal retirement, early retirement or FI is identical. So if you understand how the math works, you will not worry too much about making distinctions. Also, many people do not understand that FIRE is a calling. They do not recognise the difference between “not having the need to work for a living” and “not wanting to work for a living”. FI or RE does not mean the person will sit idle! Also, there is nothing wrong with wanting to retire normally.

Thumb rule chart for financial independence and early retirement

So let us get straight to it. Suppose your annual expenses are 4 lakh and you want to be financially independent for 5 years. Assuming 8% inflation and 8% post-tax return on the entire portfolio, you will need 5 x 4L = 20L. That is if inflation = portfolio return, the real return (excess return) = 0. For no real return, if you want FI for 5Y, the corpus will be 5 times your current annual expense. If you want it for 15Y, the corpus will be 15 times expenses and so on. Now read the following table for 0%, 1%,2% and 3% excess return above (8%) inflation. Use these as an extremely approximate initial guideline.  Compared to other thumb rules, this is fairly exact (mathematically) but still has serious problems as we will discuss in the next post.


Notice that, longer the FI tenure, the more the corpus falls as the real return increases. For 30Y, the corpus falls from 30X to 21X as we increase the real return. This fall is less dramatic as we decrease the tenure. Can you guess why? Many FIRE seekers especially those who take blogs like MMM seriously complain that I am too conservative with the use of a 0% real return. We will soon see how even conservative assumptions are seriously flawed.

I have seen FIRE blogs where the advice is to hold 70% in stocks. This is atrociously bad advice. If you have used my robo advisory template, you will notice that it will recommend lower equity allocation, earlier the retirement age. We will consider why this has been done in future posts. My aim with this is series is to build a tool to check the robustness of any retirement or FI corpus.

The Excel calculator and android app linked below can answer the following questions

What is the corpus required for FIRE?

Given the initial annual expense (payment), return on corpus (post-tax), inflation rate and FI tenure, the corpus required can be calculated as =PV((1+return)/(1+inflation)-1,years,-payment,,1)

Fire calculator: wjhat the is the corpus required? Calculator screenshot

How long will a FIRE corpus last?

Given a corpus, portfolio return, inflation rate and initial annual expenses (payment/withdrawal), we can find out how long the corpus will last =NPER((1+return)/(1+inflation)-1,-payment,corpus,,1)

Fire calculator: how long will a corpus last? Calculator screenshot

How much can I draw from a FIRE corpus?

Given a corpus, return (int rate), inflation, and FI tenure (years), we can find the how much we can withdraw in the first and last year.

1st payment: =PMT((1+return)/(1+inflation)-1,years,-corpus,,1)

last payment: =PMT((1+return)/(1+inflation)-1,years,-corpus,,1)*(1+inflation)^(years-1)

Fire calculator: how much can I draw from a corpus? Calculator screenshot

What is the portfolio return required for FIRE?

Given a corpus, inflation rate, Fi duration, initial annual expenses the portfolio return required can be calculated as =RATE(years,-payment,corpus,0,1)*(1+inflation)+inflation)

Fire calculator: what is the rate of return required? Calculator screenshot

Play around with these tools and let me know what you think.

Get the free E-book: How to retire early in India

Download the set FIRE calculators (excel, will work on Windows, Mac, Google sheets)

Get the Android app from Google play: Financial Freedom Calculator.

Remember that is only a ballpark estimate to get started. Serious FIRE planning will require us to understand the drawbacks of these calculations. We will consider that in the next post. Stay tuned. Have a great week.

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About the Author M Pattabiraman author of freefincal.comM. Pattabiraman(PhD) is the author and owner of freefincal.com.  He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management.  He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis. He conducts free money management sessions for corporates  and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)
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Do check out my books

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingMy first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.  It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantGamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

The ultimate guide to travel by Pranav Surya

Travel-Training-Kit-Cover This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step.  Get the pdf for ₹199 (instant download)

Free Apps for your Android Phone

All calculators from our book, “You can be Rich Too” are now available on Google Play!
Install Financial Freedom App! (Google Play Store)
Install Freefincal Retirement Planner App! (Google Play Store)
Find out if you have enough to say "FU" to your employer (Google Play Store)

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Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.


  1. This app from play store , when downloaded by me,is picked up by Antivirus app as having malware with serious threat.
    What should I do?

  2. thank you for the post and template. It is very much useful even for retiree to check whether the means available are adequate etc.

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