The Formula
The basic FI Number formula
The FI Number comes from one simple relationship: if you withdraw a fixed percentage of your portfolio each year, how large does it need to be to cover your expenses indefinitely?
FI Number = Annual Expenses ÷ Withdrawal Rate
At 4% withdrawal rate: multiply annual expenses by 25
At 3.5% withdrawal rate: multiply annual expenses by 28.6
At 3% withdrawal rate: multiply annual expenses by 33.3
So if you spend $60,000/year and use the 4% rule, your FI Number is $1,500,000. At 3.5% it's $1,714,286. The withdrawal rate you choose has a massive impact on the target.
Canadian Two-Phase FI
Why Canadians have two FI Numbers
The standard FI Number calculation assumes your portfolio funds 100% of your expenses forever. But Canadians have CPP and OAS — government income that starts in your 60s and significantly reduces how much your portfolio needs to generate.
This creates two distinct phases:
| Phase | When | Portfolio Funds | FI Number |
|---|
| Phase 1 | Retirement to CPP/OAS start | 100% of expenses | Higher |
| Phase 2 | After CPP + OAS begin | Expenses minus govt benefits | Lower |
Example: Annual expenses $72,000. CPP + OAS combined $24,000/yr.
Phase 1 FI Number (4%): $72,000 ÷ 0.04 = $1,800,000
Phase 2 FI Number (4%): ($72,000 − $24,000) ÷ 0.04 = $1,200,000
CPP and OAS reduce the required portfolio by $600,000 in this example.
Note: OAS maximum is $743.05/month (age 65–74, 2026) or $817.36/month (age 75+,
with the permanent 10% boost) for those with 40 years Canadian residency after age 18.
Partial OAS applies if fewer years — prorated at years ÷ 40.
Early retirees: use your real CPP estimate, not the maximum.
The CPP maximum ($1,507/month in 2026) requires ~39 years of maximum contributions.
Retiring at 45 means roughly 27 contribution years — your actual CPP will likely be
45–55% of the maximum, not 100%. Overstating CPP in your Phase 2 FI Number
underestimates how large your portfolio needs to be. Check your real projected CPP at
My Service Canada Account.
What to Include
What expenses to include in your FI Number
- Core living expenses — housing, food, transportation, utilities
- Mortgage payments — include them if you'll carry a mortgage into retirement. FireCA's real estate planner tracks your payoff timeline and automatically removes the payment from expenses once it's cleared
- Healthcare and insurance — especially important in early retirement before government coverage fully applies
- Travel and lifestyle — be honest about what retirement actually looks like for you
- A buffer for inflation — either use Real Spending mode or build in a cushion manually
- Taxes on withdrawals — RRSP and RRIF withdrawals are taxable income. Account for this when estimating net spending needs
- Don't include CPP contributions — these are payroll deductions that end when you stop working, not a retirement expense
- Don't include retirement savings contributions themselves
Withdrawal Rate Choice
Which withdrawal rate should Canadians use?
The 4% rule was designed for a 30-year retirement. If you're planning to retire at 40 or 45 with a 50+ year horizon, many experts suggest using a more conservative rate.
| Withdrawal Rate | FI Multiplier | Best For | Risk Level |
|---|
| 4% | 25× | Retiring at 60–65 | Moderate |
| 3.5% | 28.6× | Retiring at 50–60 | Conservative |
| 3% | 33.3× | Retiring at 40–50 | Very Conservative |
| Variable | — | Any age with flexibility | Low |
For most Canadian early retirees, 3.5% is a reasonable starting point — conservative enough for a long retirement but not so restrictive that you need to accumulate an enormous portfolio.
Advanced Modes
Two alternate ways to set your FI Number
The standard formula uses your current spending. FireCA also offers two alternatives:
Custom Target Annual Withdrawal: Instead of matching current expenses, set a specific annual income target for retirement — useful when your retirement spending will differ significantly from today. Your FI Number is then that target ÷ withdrawal rate.
Die with Zero Mode: Instead of a perpetual withdrawal rate, this mode estimates the portfolio needed to fund spending from your retirement age to your life expectancy, depleting close to zero. For a 50-year-old with a 90-year life expectancy and $60,000/year in spending, the required portfolio is lower than the perpetual calculation — but there's no margin for living past your planning age. Use this if you expect significant assets to arrive later (inheritance, home sale) or you prefer a finite-horizon model.
Real Spending Mode
Inflation-adjusting your FI Number
In standard (nominal) mode, your FI Number assumes spending stays flat in dollar terms. Real Spending mode adjusts for inflation:
- Retirement spending grows each year with your inflation assumption (default: 2.1% CPI)
- The app converts your nominal return to a real return for accumulation projections
- Your FI Number remains expressed in today's dollars, making it easier to track progress
Example: $60,000/year today at 2.1% inflation requires $66,474/year in 5 years. At a 4% withdrawal rate, this means your nominal FI Number grows over time — Real Spending mode handles this automatically so you don't underestimate.
Calculate your exact FI Number
FireCA computes both your Phase 1 and Phase 2 FI Numbers with real CPP, OAS, RRSP, and TFSA math — free and private.
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