FIRE Calculator

The FIRE calculator can help you in the following manner:

1. Retirement Goal:

   This calculator helps you estimate the amount you will need to retire based on current expenses and future expenditures adjusted for the assumed inflation rate.

2. Retirement Age:

   The FIRE calculator helps you estimate the retirement age. You can analyze your current savings and investments and judge the time required to reach the FIRE number.

3. Inflation:

   The FIRE calculator includes the impact of inflation, which helps in ensuring the exact amount required at the time of retirement.

4. Discipline:

   The FIRE calculator helps maintain financial discipline and promotes savings and investments.

The process through which a FIRE calculator works is as follows:

1. Input Field:

   When you open a FIRE calculator, you will find an input field in which you have to enter a few details, such as your current age, desired retirement age, current monthly expenses, assumed inflation rate, and the desired Coast FIRE age.

2. Implementation of Formula:

   Once the details are entered, you are required to apply the formula used to derive the FIRE value.

3. Result:

   You will get the final values on the screen, which reflects the total amount required to retire peacefully.

There are certain rules related to FIRE number calculation, and the formula to calculate the same is mentioned below:

1. The current age should be less than the desired Coast FIRE age.

2. The Coast FIRE age should always be less than the Retirement age.

The formulas used by the calculator are:

• Expenses Today = Monthly Expenses * 12

• Expenses At Retirement Age = Expenses Today * [(1+Inflation)^(Retirement Age - Current Age)]

• Lean FIRE = (Expenses At Retirement Age) * 15

• FIRE = (Expenses At Retirement Age) * 25

• FAT FIRE = (Expenses At Retirement Age) * 50

• Coast FIRE = (FIRE) / [(1 + Growth Rate) ^ (Retirement Age - Coast FIRE Age)]

Note: Growth Rate in the above calculator is fixed at 10%.

Let’s understand the FIRE calculation with an example:

Mr A is currently 25 years of age, and his current monthly expenses are ₹50,000. He wishes to retire at 45, and he has the desired Coast FIRE age of 40 years; inflation in the economy is expected to be around 7%. To calculate the FIRE number, he uses Pocketful’s calculator

Based on the above scenario, he entered all the details in Pocketful’s FIRE number calculator and got the desired result as mentioned below:

Expense Today = ₹50,000 * 12 = ₹6,00,000 annually
Expenses at the Age 45 = ₹6,00,000 * [( 1+ 7%) ^ (45 - 25)] = ₹23,21,811 annually
Lean FIRE = ₹23,21,811 * 15 = ₹3,48,27,160
FIRE = ₹23,21,811 * 25 = ₹5,80,45,275
FAT FIRE = ₹23,21,811 * 50 = ₹11,60,90,550
Coast FIRE = ₹5,80,45,275 / [(1 + 10%) ^ (45 - 40)] = ₹3,60,41,549

Hence, based on the above output, Mr A can choose their future lifestyle and retirement corpus and plan accordingly.

The steps to use the Pocketful FIRE calculator are as follows:

1. Visit the Pocketful website and scroll down to the bottom of the page.

2. There is a section called Tools; just click on it..

3. On the next page, you will find a tab named “Financial Calculators”; just click on it.

4. There, you can see the FIRE calculator.

5. To use it, you are required to enter a few details such as your current age, expected retirement age, current monthly expenses, etc.

6. Once you enter the details, you will get the desired result: Lean FIRE, FIRE, Fat FIRE and Coast FIRE numbers.

There are several benefits of using a FIRE number calculator; a few of such benefits are mentioned below:

• Target Amount:

  Through the FIRE calculator, one can easily get to know about the target amount required at the time of retirement.

• Investment Strategy:

  One can plan their retirement efficiently through the FIRE calculator and choose the suitable asset class based on the expected returns.

• Inflation:

  Due to inflation, the value of your retirement corpus decreases over time; hence, including the same in calculations will help you plan your retirement efficiently.

• Comparison:

  There are various FIRE numbers, such as Lean FIRE, Fat FIRE, and Coast FIRE, allowing you to compare different FIRE numbers based on your retirement lifestyle.

• Peace of Mind:

  The FIRE calculator helps you plan your retirement, as the amount calculated will take care of your expenses after retirement.

On a concluding note, planning your retirement is essential as in today’s world no one wishes to work till 60 years of their life. Hence, there is a concept called FIRE or Financial Independence Retire Early, in which one can choose their retirement age, and a FIRE calculator helps plan early retirement efficiently. You only need to enter a few inputs like current age, monthly expenses, expected retirement age, etc., and get the desired results. However, it is advisable to consult your investment advisor before making any investment decision.
Pocketful offers you a free-to-use FIRE calculator through which you can plan your retirement efficiently.