FI Number
The portfolio value at which investment income covers annual expenses indefinitely.
Annual expenses multiplied by 25. The multiplier is just the reciprocal of a 4% withdrawal rate, so a different assumed rate changes it directly: 3% gives 33 times expenses, 5% gives 20.
Because the input is spending rather than income, two households earning identically can have targets a million dollars apart. Housing costs, healthcare arrangements and household size drive most of the spread.
The threshold is also less binary than the single number implies. A portfolio covering half of expenses does not confer independence, but it does change what a layoff means and what a pay cut costs, and those effects arrive long before the target does.
Worked through
Progress against a $1.625M target
Annual expenses of $65k, target set at 25 times spending.
- Annual spending
- $65k
- Target at 25x
- $1.625M
- Portfolio today
- $480k
- Share of target
- 30%
At 4%, the current portfolio already supports $19,200 a year, close to 30% of the household's spending.
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