Working out your FIRE number, and why 25× is optimistic in India

The rule of 25 came from a study of US markets with 3% inflation and a 30-year retirement. Here is what changes when you apply it to a 45-year Indian retirement.

By Raj Mohan

20 Aug 2026 · 5 min read · fire, retirement, independence

Financial independence has one definition worth using: the point at which your portfolio can fund your living costs indefinitely without you working. The number attached to it — the corpus that makes that true — is where almost every mistake happens.

Where the rule of 25 comes from

The multiplier traces to the Trinity Study of the 1990s, which tested historical US portfolios against fixed withdrawal rates. It found that withdrawing 4% of the starting corpus in year one, then raising that rupee amount with inflation each year, survived thirty years in almost every historical period tested.

Four per cent is one twenty-fifth. Hence 25× annual expenses.

Four assumptions are embedded in that, and three of them do not travel well.

A thirty-year retirement. Someone retiring at 65 in 1995. Someone retiring at 45 needs the money to last forty-five years or more, which is a materially harder problem — failure rates rise steeply beyond thirty years.

US inflation of roughly 3%. Indian inflation has averaged closer to 6%, and household inflation for education and healthcare runs higher still. The withdrawal rises faster in rupee terms every year.

A specific portfolio. Roughly 50/50 US equity and bonds, in the currency of the world's deepest markets.

No taxes and no fees. The study measured gross portfolio returns. Real withdrawals attract capital gains tax and expense ratios.

What the number should be instead

A defensible Indian starting point is 30× to 33× annual expenses, implying a withdrawal rate of 3% to 3.3%.

That is not conservatism for its own sake. It reflects a longer horizon, higher inflation, and the fact that the consequence of getting this wrong is being sixty-two, unemployed for seventeen years, and out of money. The asymmetry justifies the caution.

Some worked figures, assuming you are calculating in today's rupees and retiring soon:

The step everyone skips

Those figures assume you stop working now. If you are thirty-five and retiring at fifty, the expenses to multiply are not today's — they are today's inflated by fifteen years.

At 6%, ₹1,00,000 a month today is about ₹2,40,000 a month at fifty. Annualised, ₹28.8 lakh. At 30×, the target is roughly ₹8.6 crore, not the ₹3.6 crore you get from multiplying today's figure.

This single omission is the difference between a plan and a wish. Inflate first, then multiply.

What "expenses" has to include

The number you multiply has to be the cost of the life you will actually live, not the one you live now.

Things that go up. Health insurance premiums rise sharply after sixty and coverage narrows. Medical costs inflate faster than anything else in the basket. If you retire before employer cover ends, you are buying it yourself.

Things that go away. Commuting, work clothes, the EMI if the loan is cleared, and the savings rate itself — you are no longer setting aside 40% of income, which is often the largest single line in a pre-retirement budget.

Things that arrive in lumps. A car every eight years, a roof every fifteen, a wedding, a family medical event. These are not annual costs, so they do not belong in the multiplier, but they do need a separate provision. A common approach is to hold them outside the corpus entirely.

Sequence of returns is the real risk

The multiplier assumes an average return. What actually determines whether the money lasts is the order the returns arrive in.

Two retirees with identical average returns over twenty years can end up in completely different places if one of them met a 40% drawdown in years two and three. Withdrawing a fixed rupee amount from a portfolio that has fallen means selling many more units, and those units are not there to recover.

Two defences, both cheap:

Hold two to three years of withdrawals in cash and short-duration debt. In a bad year you spend from that bucket and leave equity alone to recover. This is the single most effective structural protection available.

Be willing to cut spending in a bad year. A retiree who reduces withdrawals by 10% during a drawdown improves survival odds dramatically. The rigid-withdrawal assumption in the original study is the one real people are least bound by.

The other half of the equation

The corpus is only one lever. The savings rate determines how long you need.

At a 50% savings rate, roughly seventeen years of work funds a standard retirement. At 60%, about twelve. At 70%, under nine. The relationship is not linear, because a higher savings rate simultaneously builds the corpus faster and shrinks the corpus needed — you are living on less, so you need less.

This is why FIRE conversations focus so heavily on spending. Cutting annual expenses by ₹1 lakh reduces the target by ₹30 lakh at a 30× multiple, and adds ₹1 lakh a year to contributions. One decision, working both ends.

Lean, coast, and the honest middle

The full version — never working again — is not the only outcome worth aiming at.

Coast FIRE is the point at which existing investments will grow into a full retirement corpus by sixty without further contributions. You still work, but only for current expenses. It typically arrives ten to fifteen years before full independence and it changes the character of employment considerably.

Barista FIRE covers most expenses from the portfolio, with part-time or lower-stress work covering the rest. It needs a much smaller corpus and it removes the sequence risk of the early years, because you are not fully drawing down yet.

Both are worth calculating alongside the headline number. The headline number is often two decades away; the intermediate ones are frequently much closer than people assume, and they buy most of the freedom.

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Published by FinClamp. This guide is information, not financial advice — see the disclaimer.