What is financial independence
Financial independence is the point where the income generated by your investments is enough to cover your lifestyle, without depending on a paycheck. It's the goal behind movements like FIRE (Financial Independence, Retire Early).
How the projection works
This calculator uses the compound interest formula with monthly contributions: FV = P × (1+i)ⁿ + C × [((1+i)ⁿ − 1) / i], where P is your current net worth, C is the monthly contribution, i is the monthly rate (converted from your annual return) and n is the number of months.
Reverse calculation: how much to contribute
If you enter a net worth goal, the calculator also shows the monthly contribution needed to get there within your chosen time frame, by isolating C in the formula above. This helps you plan how much to set aside each month to retire with a specific amount.
The 4% rule
A common rule of thumb for how much net worth you need to live off your investments is the "4% rule": multiply your desired annual spending by 25 (i.e. divide by 4%). This assumes you can withdraw 4% of your portfolio per year indefinitely while keeping the principal invested.
Frequently asked questions
What annual return is reasonable to use in the simulation?
It depends on your investment profile. Conservative portfolios typically project 4% to 6% per year above inflation; more aggressive, equity-heavy portfolios, 6% to 10%. Use a realistic figure for your time horizon and risk tolerance.
Does the result account for inflation?
Not directly — if you use a return rate already adjusted for inflation (a "real" return), the projected value will be in today's purchasing power, which makes planning easier.
What is the 4% rule?
It's a rule of thumb suggesting you can withdraw 4% of your invested portfolio per year sustainably over the long run without depleting the principal — widely used to estimate how much net worth is needed to retire.
Do irregular contributions affect the calculation?
The calculator assumes constant monthly contributions. If your contributions vary, use an approximate monthly average for a reasonable estimate.