# Your FI Number: From Annual Spending to a Target

> Turn your annual spending into a financial-independence target, adjust it for other income and big future costs, and stress-test it as a range.

- URL: https://moneymaster.fyi/your-fi-number-from-annual-spending-to-a-target/
- Publication: Money Master (Accel Media)
- Topic: FI maths
- Published: 2026-11-09; updated: 2026-11-09
- Official sources last checked: 2026-11-09
- Published by: Greg M., Editor in Chief

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Your financial-independence number, or FI number, is the amount of savings and investments that would make paid work optional. It isn't a magic figure. It's your own spending, turned into a target, with some honest margins added. The method below has five steps, and it ends with a range rather than a single number, because every input is an estimate.

This guide is general education, not individual financial, investment or tax advice. The figures in the worked example are invented, and the withdrawal rates are rules of thumb from historical research, not guarantees.

## Step 1: Estimate spending in retirement

The starting point is what life costs now. A full year of real figures is far more reliable than a guess, which is why [the 12-month spending review](https://moneymaster.fyi/know-what-your-life-costs-a-12-month-spending-review/) comes first.

From there, people adjust for the life they expect after work. Some costs may fall: commuting, work clothes, saving for retirement itself, and mortgage payments if the loan will be paid off. Others may rise: travel, hobbies, and in the US, health insurance before Medicare, which is health insurance for people 65 or older who meet citizenship or residency requirements ([Medicare.gov](https://www.medicare.gov/basics/get-started-with-medicare), checked November 9, 2026). Someone stopping work at 50 may have 15 years of coverage to buy before then.

Many people find their retirement spending ends up close to today's, just spent differently. Taxes on withdrawals belong in this figure too; Step 5 and the questions at the end come back to them.

## Step 2: Subtract income you'll still have

Savings only need to cover what other income doesn't. The usual candidates are a pension, Social Security later on, and earnings from part-time or freelance work.

Social Security estimates are personal. A my Social Security account gives access to your Social Security Statement and tools to estimate benefits you could receive at different ages ([SSA, my Social Security](https://www.ssa.gov/myaccount/), checked November 9, 2026).

Timing is the catch. Income that starts years from now does nothing for the years between an early retirement and that date. A common way to handle this is to work out the FI number in two parts: the years before other income begins, covered entirely from savings, and the years after, when the gap is smaller. The simple version below ignores Social Security entirely, which makes the target larger, not smaller.

## Step 3: Apply a withdrawal multiple

Next, the yearly amount that savings must cover is multiplied by a number based on a chosen withdrawal rate. The multiple is just 1 divided by the rate:

| Withdrawal rate | Multiple (1 ÷ rate) |
| --- | --- |
| 4% | 25× |
| 3.5% | about 28.6× |
| 3% | about 33.3× |

The 4% figure comes from US historical studies of 30-year retirements, using market data from 1926 onward, which assumed specific stock and bond mixes and left out fees and taxes. Past performance does not guarantee future results. One of those studies, the Trinity study, concluded that early retirees who anticipate long payout periods should plan on lower withdrawal rates ([AAII Journal, February 1998](https://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable), checked November 9, 2026). That's why many people planning a long retirement test a lower rate, which means a higher multiple. [The 4% rule in plain English](https://moneymaster.fyi/the-4-percent-rule-in-plain-english/) explains the research and its limits.

## Step 4: Add one-off future costs

Some big costs are clearer when added on top rather than folded into yearly spending: health insurance before Medicare, if it isn't already in Step 1; a replacement car; a roof or other major home repair; help for family, such as college costs. Each is a guess about the future, so a rough figure is fine. The point is not to forget them.

## Step 5: Stress-test it

Here's a worked example. It's an invented couple with assumed figures, not a forecast or a recommendation.

The couple expects to spend $60,000 a year in retirement. They have no pension, and Social Security won't start for many years, so they leave it out. They expect about $100,000 of one-off costs for a car and home repairs.

| Withdrawal rate | Calculation | Plus one-off costs | FI number |
| --- | --- | --- | --- |
| 4% | $60,000 ÷ 0.04 = $1,500,000 | + $100,000 | $1,600,000 |
| 3.5% | $60,000 ÷ 0.035 ≈ $1,714,000 | + $100,000 | about $1,814,000 |
| 3% | $60,000 ÷ 0.03 = $2,000,000 | + $100,000 | $2,100,000 |

Their FI number is a range, from about $1.6 million to $2.1 million, depending on how cautious a withdrawal rate they plan around.

Now add taxes. Suppose, as another assumption, that taxes on their withdrawals would add about $6,000 a year, so savings must provide $66,000. At 4%, that's $66,000 × 25 = $1,650,000 before one-off costs, $150,000 more than the untaxed figure. Fund fees work the same way: anything that comes out of the portfolio before spending raises the target. Invest Insights shows how fees add up in [expense ratios: what a fund's fee costs you](https://investinsights.net/expense-ratios-what-a-funds-fee-costs-you/).

Two more tests are useful. One is spending: what if it runs 10% higher than planned, at $66,000 instead of $60,000? At 3%, that's $66,000 ÷ 0.03 = $2,200,000 before one-off costs, $200,000 more than the table's figure. The other is time: a longer retirement points toward the lower withdrawal rates in the table. Planning around a range is more honest than planning around a single number, and it shows how much each assumption is worth.

![A hiking daypack being packed on a wooden floor with a rain jacket, sweater, water bottle, and torch laid out.](https://moneymaster.fyi/media/your-fi-number-from-annual-spending-to-a-target--inline-1-1600w.webp)

## How long it takes to get there

The FI number is the target. The pace is set mostly by how much of your income you save, because a higher savings rate builds the pot faster and lowers the spending it has to support. [Savings rate: the number that decides when you can retire](https://moneymaster.fyi/savings-rate-the-number-that-decides-when-you-can-retire/) shows that relationship under stated assumptions.

Where the money sits matters too. For someone stopping well before 59½, part of the pot needs to be reachable early, which is covered in [tax-advantaged accounts for early retirees](https://moneymaster.fyi/tax-advantaged-accounts-for-early-retirees-explained-simply/) and [getting at retirement money before 59½](https://moneymaster.fyi/getting-at-retirement-money-before-59-and-a-half/).

## Common questions

**Is 25 times expenses enough?** It's the multiple that matches a 4% starting withdrawal, which comes from US historical studies of 30-year retirements using market data from 1926 onward. Past performance does not guarantee future results. For a longer early retirement, many people test a higher multiple.

**Should I include Social Security in my FI number?** One approach is to leave it out of the years before it starts and count it only from the age it begins. Your own estimate is available through a my Social Security account.

**Does my house count toward my FI number?** Usually not, unless there's a plan to sell it or release equity. A paid-off home does lower the yearly spending that savings must cover.

**How do taxes affect my FI number?** Most retirement plan distributions are subject to income tax ([IRS, tax on early distributions](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions), checked November 9, 2026), and distributions from a traditional IRA are taxed as ordinary income, while Roth IRA distributions aren't taxed as long as certain criteria are met ([IRS Publication 590-B](https://www.irs.gov/publications/p590b), checked November 9, 2026). So the spending figure may need to include tax, depending on which accounts the money comes from. How this applies depends on your situation; a tax professional can confirm it. We are not CPAs, and this guide has not been reviewed by a CPA. Invest Insights covers how each account is taxed in [IRA, Roth, taxable or HSA: which account does what](https://investinsights.net/ira-roth-taxable-or-hsa-which-account-does-what/).

Sources checked November 9, 2026: [Medicare.gov, get started with Medicare](https://www.medicare.gov/basics/get-started-with-medicare), [SSA, my Social Security](https://www.ssa.gov/myaccount/), [Carl M. Hubbard, AAII Journal, February 1998](https://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable), [IRS, tax on early distributions](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions) and [IRS Publication 590-B](https://www.irs.gov/publications/p590b).

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