The FIRE Number: 25x Annual Expenses

FIRE (Financial Independence Retire Early) uses the 4% rule: withdraw 4% of your portfolio annually forever. This requires 25x your annual expenses saved. Example: spend $50,000/year → FIRE number = $50,000 × 25 = $1.25M. At retirement, withdraw $50,000 (4% of $1.25M) and let the rest grow. Historical stock returns (7% average) support 4% withdrawals indefinitely. This is the foundational FIRE math.

CPP/OAS Reduces Your FIRE Number

Canadian FIRE is different—CPP/OAS provide income starting at 60–65. If CPP/OAS cover $25,000/year of your $50,000 spending, you only need 25x ($50,000 − $25,000) = $625,000. CPP at 65 averages $18,000/year; OAS (also 65) averages $7,000/year. Claiming early (60) reduces benefits by ~36%; delaying (70) increases by ~42%. Many Canadian FIRE seekers underestimate CPP/OAS impact—it can cut your FIRE number by 30–50%.

Lean vs Fat FIRE in Canada

Lean FIRE: spend $40,000/year ($1M needed). Fat FIRE: spend $80,000/year ($2M needed). FIRE doesn't mean poverty—it means freedom. Canadian costs are high (housing, healthcare partially covered, but long-term care may not be). Most FIRE seekers aim for $60,000–$80,000 annual spending. Rural areas enable leaner FIRE; cities require fat FIRE. Plan your lifestyle first, calculate FIRE number second.

Sequence of Returns Risk in Early Retirement

Retiring into a market crash is dangerous (sequence of returns risk). If your first 3 years of retirement see -20% returns, your 4% withdrawal may not be sustainable. Canadian FIRE seekers should hold 2–3 years of expenses in cash/HISAs to survive downturns without selling stocks at losses. This "stability fund" adds complexity—instead of 25x, you need 25x + 2–3 years extra in cash.

Canada-Specific FIRE Considerations

Healthcare is public (provincial variation, dental/prescriptions not covered). Income-tested benefits (Canada Worker Benefit, housing support) may apply if you withdraw little income early. Some provinces offer better FIRE math (Alberta no provincial sales tax). Tax planning is crucial—draw from RRSP for tax credits if income is low; draw from TFSA for tax-free growth. Canadian FIRE is feasible but requires detailed planning around taxes and benefits.