What is Financial Independence, Retire Early (FIRE)?
Financial Independence means having enough automated wealth or a large enough investment corpus that the passive returns cover your active living expenses.
The Mathematics of the Retirement Corpus
Planners calculate retirement corpuses dynamically using three primary moving parts:
- The Inflation Drag: How much your expenses will bloat by the time you actually stop working.
- The Sequence of Returns: Your assumed interest rate or ROI strictly during the withdrawal phase.
- Real Returns: The difference between your ROI and Inflation. If it's zero, your corpus diminishes linearly. If it's positive, you are safely withdrawing your money.