Overview of Your FIRE Number Is Probably Wrong — Here’s Why
This BiggerPocketsMoney episode breaks down why a lot of people in the FI/FIRE community calculate their “FI number” incorrectly. The main message: your number should be based on your real retirement spending needs, not on simplistic rules of thumb or your current lifestyle. Mindy Jensen and Scott Trench walk through the most common planning mistakes and explain how to build a more realistic FIRE plan that accounts for healthcare, big future expenses, portfolio stress tests, and the possibility of earning income again in early retirement.
The 6 Biggest Mistakes When Calculating Your FIRE Number
1) Using current expenses or current income instead of retirement expenses
Your current spending is not your retirement spending.
- Some expenses disappear in retirement:
- Childcare
- Commuting
- Work-related costs
- Retirement savings contributions
- Some expenses may rise:
- Travel
- Hobbies
- Leisure and discretionary spending
Key takeaway: Track your expenses in detail and build a retirement budget around the life you actually want, not a generic income-replacement formula.
2) Treating the 4% rule like a universal law
The 4% rule is a rule of thumb, not gospel.
- It was built around a specific 30-year retirement assumption.
- Early retirees may need a different withdrawal rate depending on:
- Time horizon
- Market valuations
- Spending flexibility
- Risk tolerance
- The episode notes that serious researchers disagree on the right range, with some arguing for something closer to 3%–3.5% and others suggesting 5% may be viable in some cases.
Key takeaway: The 4% rule is helpful as a starting point, but it should not be your entire retirement strategy.
3) Underestimating healthcare costs and subsidy risk
Healthcare is one of the biggest expenses that changes in retirement.
- Premiums tend to rise with age.
- Out-of-pocket costs often increase as you get older.
- ACA subsidies may not remain as generous forever, and future policy changes could make early retirees pay more.
Key takeaway: Model healthcare separately from general inflation and don’t base your plan on subsidies lasting forever.
4) Forgetting major one-time or irregular expenses
Big costs often get missed because they don’t happen every month.
Examples mentioned:
- Home repairs and replacements
- HVAC
- Roofs
- Appliances
- College
- Weddings
- Elder care
Key takeaway: Build a separate “big expenses” bucket or buffer into your plan so surprise costs don’t derail your FIRE number.
5) Not stress testing your FIRE number before quitting
Many people spend years theorizing about retirement without ever practicing it.
- The hosts recommend testing your plan before you fully retire.
- One approach: move a portion of your portfolio into a “decumulation” bucket and practice selling from it.
- This helps build confidence and reveals whether your spending assumptions actually work.
Key takeaway: Don’t make retirement purely academic—simulate it first.
6) Assuming you’ll never earn income again
Many early retirees end up making some money after leaving full-time work.
- This might be through:
- Consulting
- A side business
- Freelance work
- Content creation
- Opportunistic project work
- Even modest income can greatly reduce pressure on your portfolio.
Key takeaway: FIRE should create options, not lock you into a purity test of “never work again.”
What the Hosts Recommend Doing Instead
Track spending in detail
The episode strongly encourages granular expense tracking so you can understand:
- What you actually spend now
- What disappears in retirement
- What will likely increase later
They mention using tools like Monarch and even exporting data into AI tools for deeper analysis.
Build a more realistic retirement model
A better FIRE number should account for:
- Your desired retirement lifestyle
- Healthcare inflation
- One-time expenses
- Expected flexibility in spending
- Potential side income
Stay open-minded about early retirement
Rather than seeing FIRE as a rigid endpoint, the hosts frame it as a path to:
- More freedom
- Better health
- More flexibility
- More options if markets or life change
Final Takeaway
The big message of the episode is that your FIRE number is not a single magic formula. It should be a living estimate based on your real future expenses, not a simplistic income-replacement rule. The more accurately you model healthcare, big purchases, flexibility, and future income potential, the more likely your FIRE plan will work in real life.
Notable Insight
“FIRE is about options.”
That idea captures the episode well: early retirement is not just about quitting work, but about designing a life with freedom, resilience, and flexibility.