FI Projections
Financial independence is the point where portfolio income covers living expenses. The target follows from spending rather than from income, which is why two households on the same salary can have very different numbers.
It describes a portfolio large enough to cover expenses indefinitely, at which point continuing to work is a choice rather than a requirement.
Annual Expenses ÷ Safe Withdrawal Rate = FI Number
Worked through
$60,000 ÷ 0.04 = $1,500,000
The same spending at a 3% rate gives $2,000,000, and at 5% gives $1,200,000. The target is as sensitive to the rate as it is to the spending.
Spending is on both sides of this calculation. Lowering annual expenses reduces the target and raises the amount available to save against it, which is why the figure moves faster than a single change would suggest.
This content is educational and informational only. It is not financial, investment, or tax advice. Consult a qualified professional before making financial decisions.