Barista FIRE Calculator
On mobile devices the chart is best suited for landscape mode.
What Is Barista FIRE / Barista FI?
Barista FIRE is a financial independence strategy where you achieve partial financial freedom and cover the gap to full retirement with part-time work. This approach allows you to reduce stress, enjoy a more flexible lifestyle, and supplement your income while letting your investments grow until full retirement age. You can read a deep-dive post from Anna on our Blog.
Guide: Understanding Your Barista FIRE Calculator
1. Enter Your Current Data
Current Age, Income, Expenses, and Portfolio: These values form the starting point of your journey. Your current portfolio and monthly savings potential (income minus expenses) determine how quickly your wealth grows.
2. Plan Your Barista FIRE Goal
- Barista FIRE Age: Specify the age at which you plan to transition from full-time to part-time work. This marks the point where your portfolio will start covering a portion of your living expenses.
- Monthly Income from Part-Time Work: This income reduces the amount you need to withdraw from your portfolio, extending its longevity.
3. Retirement Phase
- Retirement Age: Define the age at which you plan to fully retire. At this stage, your portfolio and withdrawal rate will cover all your living expenses.
- Annual Retirement Expenses: Enter the inflation-adjusted amount you need during retirement. This figure is used to calculate your FIRE Number (the portfolio goal for complete financial independence).
4. Key Assumptions
- Portfolio Growth Rate: Specify the expected return on your investments. This rate is crucial for simulating your wealth growth over time.
- Safe Withdrawal Rate (SWR): This rate determines the percentage of your portfolio you can withdraw annually during retirement without depleting it.
How It All Works Together
Before Barista FIRE: Your portfolio grows through investment returns and savings. This phase maximizes your wealth accumulation.
During Barista FIRE: Your part-time income covers part of your expenses, reducing withdrawals from your portfolio. This allows your portfolio to grow, albeit at a slower pace.
After Barista FIRE: In full retirement, your portfolio fully funds your expenses. The calculations ensure that your portfolio and selected SWR provide long-term financial security.
Your FIRE Number: Your FIRE number is the amount of money you need to have saved up in your portfolio so that the passive income it generates can pay for your bills. Basically forever, without fearing to run out of money. That in itself depends on how much money you withdraw from your portfolio.
For example, let’s assume your annual spendings – you expect to have in (early) retirement – are 30.000. For a safe withdrawal rate of 4% you now multiply 30.000 by 25 and get your FIRE number with 750.000. If withdrawing 4 % annually you could take out 30.000 per year for up to 30 retirement years with a very high probability to never run out of money during those 30 years.
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