What FIRE is about
FIRE stands for “Financial Independence, Retire Early”. The idea is simple: once you have built up enough wealth to cover your spending permanently from returns and withdrawals, you no longer depend on a salary. Whether you actually stop working early or simply enjoy the freedom to do so is secondary. The central question is: how much capital do I need?
Step 1: know your spending
The FIRE number does not start with wealth but with spending. What matters is what you actually need to live each month – including reserves for a car, repairs and holidays. Anyone stopping early in Germany also has to think about health insurance, which is then paid entirely out of their own pocket without an employer's share. Below we calculate with 2,000 € a month after tax.
Step 2: three ways to the target sum
Way 1: the factor 25. According to the 4 % rule you need 25 times your annual spending: 2,000 € × 12 × 25 = 600,000 €. That is quick to calculate but ignores both taxes and your actual time horizon.
Way 2: a withdrawal plan up to a point in time. Most people in Germany receive a statutory pension from 67. The portfolio therefore only has to bridge a certain period. Using the mode “How much capital do I need?” in the Withdrawal Plan Calculator with a 5 % return, 2 % inflation, a 50 % gain share and 2,000 € net a month gives:
| Bridging period | Capital required |
|---|---|
| 20 years | about 407,000 € |
| 30 years | about 543,000 € |
| 40 years | about 646,000 € |
Way 3: perpetual withdrawal. If you want to preserve your wealth permanently in real terms, you may only withdraw the return above inflation. At a 5 % return and 2 % inflation, 2,000 € net a month requires about 890,000 €. The calculator shows this value in the “4 % rule” section for comparison.
Don't forget the state pension
The biggest lever for FIRE in Germany is often the statutory pension. If you stop working at 50 and receive a pension from 67, the portfolio only has to bridge 17 years in full. After that, a much smaller withdrawal is enough. However, your pension will be lower if you stop paying in earlier. The Net Pension Calculator shows how high your pension is likely to be after tax and contributions. Then plan in two phases: the full withdrawal until the pension starts, afterwards only the gap.
Step 3: plan the path there
Once the target sum is set, the next question is how long you have to save for it. That depends above all on your savings rate, i.e. the share of income you invest. How quickly a monthly savings plan grows can be calculated with the ETF Savings Plan Calculator. The Compound Interest Calculator shows the role of time: years in which your money works are often worth more than higher savings rates.
Build in buffers
- Cautious return: better to calculate with 4 than with 7 %.
- Flexibility: if you can reduce spending a little in bad years, you need less capital.
- Side income: even a small additional income in the first years relieves the portfolio enormously.
- Cash reserve: two to three years of spending in a savings account protect you from forced sales in a crash.
Conclusion
Your FIRE number depends more on your spending and your time horizon than on any rule of thumb. The factor 25 is a good starting point; it becomes more precise when you include taxes, inflation and the start of your statutory pension. Try your numbers in the Withdrawal Plan Calculator. The examples are model calculations without guarantee and not investment advice.