When Will I Reach FIRE?

Op-Med is a collection of original articles contributed by Doximity members.

Many of us are trying to reach FIRE. But how do we know when we’ll get there?

To determine your FIRE number, you need to know a few numbers first: your goal yearly expenses ($X) and a safe withdrawal rate (4%) for your nest egg in retirement. To compute how much of a nest egg you need, use the equation 4% = $X/nest egg. For example, if you predict your monthly expenses to be $10,000, your desired yearly withdrawal amount will be $120,000 ($10,000 x 12). Some back of the envelope math will show you that you then need a nest egg of $3 million ($120,000/4%).

Now, there’s a caveat for passive income. Take again for instance that your expected yearly expenses are $120,000. However, let’s say you have passive income of $2,000/month. That is equal to $24,000 annually. Therefore, you already are covering $24,000 of your expected yearly expenses in retirement via passive income! Now, you just need to save and invest enough to cover the remaining $96,000/year.

Once you know your goal nest egg, you need to convert that into the time it will take you to reach FIRE. The main variables in that equation are:

How much you save each year
Your investment returns
How long you work

I’m going to remove investment returns from this list, just because it is the variable that you have the least control over. So, let’s focus on what we have absolute control over: time and savings.

The Powerful (and Free) Tool That Helps Me Identify How Long It Will Take to Reach FIRE

On Microsoft Excel, there is a Future Value function that can help predict the growth of your money through savings and investments. Take this example: I want to know how much my nest egg will be if I save $50,000/year and expect my investments to grow at a modest 5% after taxes and fees.

I type the following into Excel:

=FV (5%, 30, -50000, 0, 0)

The first value is the interest rate (again, not in our control directly so we assume a conservative 5%)
The second value is the number of years you are contributing/working. Let’s say you plan to retire in 30 years
The next value is the annual contribution amount, i.e., savings which must be put in as negative
The first “0” is your current savings. If you have $10,000 already saved, you would put “-10000) in this position
The last value is a “0” if you are contributing at the end of the year, which is default, or a “1” if contributing at the beginning of the year.

The takeaway? In this example, your money will be worth $3.3 million when you retire, and you will reach FIRE in 30 years at your current savings rate. Adjusting your goal nest egg and savings rate will allow you to alter how long it will take to reach FIRE. Now you know exactly what you need to do in order to reach FIRE on your terms when you want to.

Of course, there are other micro variables that could come into play. But by addressing just the variables we have power over, we take the reins in our financial lives. We gain autonomy and control.

When I Plan to Achieve FIRE

My wife Selenid and I have set our target annual expenses in retirement at $200,000. Our main expenses would be our primary home mortgage, kids’ education, and health insurance (all assuming we “retire” before the typical retirement age of 65.) This may be a bit of an overestimate but we want to be conservative. Therefore, our goal nest egg is $5 million ($200,000/4%).

However, we do have passive income. For this calculation, I am only going to count our real estate income as passive income. I’m excluding my blog and other side gig income. Why? Well, because that is kind of like work — work that I enjoy, of course. But we are talking true FIRE here. So let’s keep it pure.

We have annual rental income around $120,000. I’m going to reduce this to $100,000 to be conservative again. Therefore, our annual expenses that need covering via our nest egg goes down to $100,000 ($200,000 – $100,000). Our goal nest egg therefore becomes $2.5 million ($100,000/4%).

Now let’s plug in our numbers to Excel. Our current annual savings comes to $100,351. Additionally, our current savings in retirement accounts (not counting equity in real estate, etc.) is $414,000. Notably, I keep my estimated rate of return at a very conservative 5%. Here’s a screenshot of how it looks in the tool.

Now that we’ve entered these values, let’s play with the “years until retirement” to see how long we need to work to reach our goal nest egg of $2.5 million at our current savings rate. The answer? 12.8 years. That’s pretty good! I’d say it’s on par with a time frame that we had set out, which was to be able to go part time if desired in 10 years. That’s certainly something we could reach.

Now let’s make some adjustments. If we increase our savings rate by just 5%, as we plan to do, our time to reach FIRE decreases to 10.5 years. Or, if we increase our passive income from real estate by $50,000 annually (using our tortoise real estate investing method), our time to reach FIRE decreases to 6.1 years at our original savings rate or 4.9 years at the elevated savings rate.

This Excel FIRE calculator is a powerful tool! If we as physicians and people don’t have a goal, we will never know where we are going.

But that is not the end of the story. You still need a written financial plan, which you can check periodically to make sure you are on the right path. Having a written financial plan lets you know where you stand and if you need to make any adjustments. It also keeps you humble if your circumstances change. You know the variables involved and this allows you to manipulate them to accommodate your new circumstances.

But back to knowing when you’ll reach FIRE. Remember: Just like anything else, it is about the journey, not the destination. FIRE in itself is not the goal. You need to develop a strong WHY for your goals. And you also need to remember (myself especially included) that it’s OK to not make everything about saving for FIRE. While you’re on the journey, give yourself permission to spend money intentionally on things that make you, your loved ones, or the world happy. Life is short!

How long will it take you to reach FIRE? Share in the comments below!

Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms.

Illustration by Getty Images

All opinions published on Op-Med are the author’s and do not reflect the official position of Doximity or its editors. Op-Med is a safe space for free expression and diverse perspectives. For more information, or to submit your own opinion, please see our submission guidelines or email opmed@doximity.com.