The FI Formula: Explained

Published on July 28, 2025

The path to Financial Independence (FI) is simple in theory: save enough money so that your investments can cover your living expenses indefinitely. But what does that number look like? Here’s the formula:

The Basic FI Formula

FI Number = Annual Expenses × FI Multiplier

Most people use a multiplier of 25 based on the 4% rule, which assumes you can withdraw 4% of your portfolio annually without running out of money.

Example:

If your annual expenses are $40,000:

$40,000 × 25 = $1,000,000

This means you need $1M invested in income-generating assets to retire.

Why It’s Not Just About the Math

The formula is simple, but life isn’t. Expenses change, goals evolve, and markets fluctuate. That’s why it’s essential to revisit your plan regularly and model different scenarios.

Use our Early Retirement Estimator to calculate your timeline and see how different savings rates impact your FI date.