Before You Start
- Understand your annual living expenses in EUR (estimate for 2026)
- Know your country’s local tax rates on investment withdrawals
- Be familiar with the concept of withdrawal rates (e.g., 3.5%, 4%)
- Have access to a spreadsheet (Excel, Google Sheets) or a FIRE calculator
- Optionally, set up accounts with a European broker (e.g., Trade Republic, DEGIRO)
Time needed: 30–60 minutes
What you'll need: Laptop or smartphone, internet access, recent bank statements, access to online calculators or templates
Calculating your FIRE (Financial Independence, Retire Early) number is one of the most important steps on your journey to financial independence in Europe. Your FIRE number tells you exactly how much you need—measured in EUR—to retire and live off your investments. In this tutorial, we’ll walk through each step, showing you how to calculate your own FIRE number for 2026, with practical examples for Germany, France, and Spain. We’ll cover withdrawal rates, local tax considerations, and show you how to automate the process with tools and templates.
As we covered in our Ultimate European FIRE Guide: Financial Independence & Retire Early in EUR, knowing your FIRE number is the foundation for any serious FIRE strategy. This article dives deeper, giving you actionable steps you can follow today.
Step 1: Estimate Your Annual Expenses (2026, in EUR)
What to do: Calculate how much you expect to spend in a typical year when you’re financially independent. This includes housing, food, insurance, travel, healthcare, and discretionary spending—everything.
- Review your 2023–2024 bank and credit card statements.
- Adjust for inflation (use 2–4% per year for a realistic 2026 estimate).
- Consider changes for retirement (e.g., less commuting, more travel).
Why it matters: This figure is the core input for your FIRE number. Underestimating means you risk running out of money; overestimating means you might work longer than needed.
What can go wrong: Forgetting irregular costs (car repairs, medical emergencies), or underestimating future inflation.
Examples:
- Germany (Munich): €2,800/month x 12 = €33,600/year (2024). Adjust for 6% inflation to 2026: €33,600 x 1.06 ≈ €35,616/year
- France (Lyon): €2,400/month x 12 = €28,800/year. With 6% inflation: €28,800 x 1.06 ≈ €30,528/year
- Spain (Valencia): €1,700/month x 12 = €20,400/year. With 6% inflation: €20,400 x 1.06 ≈ €21,624/year
Pro Tip
Use Numbeo or local government statistics for average cost of living figures, and always add a 10% buffer for unexpected expenses.
Step 2: Pick Your Safe Withdrawal Rate (SWR)
What to do: Decide what percentage of your investments you feel comfortable withdrawing each year to fund your lifestyle. The classic “4% Rule” is common, but many Europeans use 3.5% or even 3% for extra safety, especially with lower expected returns or higher taxes.
- 4% is optimistic (suitable for low-tax, low-inflation countries)
- 3.5% is a balanced, conservative choice
- 3% is very cautious, often chosen for early retirees or those with higher tax drag
Why it matters: A lower withdrawal rate means you need a bigger portfolio, but your money is more likely to last through market downturns and long retirements.
What can go wrong: Using too high a rate in high-tax countries, or not accounting for sequence-of-returns risk in the early years of retirement.
Pro Tip
You can model different rates in cFIREsim or with the Monevator Withdrawal Rate Calculator (both are English-language, but work with EUR inputs).
Step 3: Calculate Your Pre-Tax FIRE Number
What to do: Use this formula:
FIRE Number = Annual Expenses / Safe Withdrawal Rate
Remember to express the withdrawal rate as a decimal (e.g., 3.5% = 0.035).
Why it matters: This is the “headline” number you see most often in FIRE circles. You’ll need to adjust it for taxes in the next step.
What can go wrong: Forgetting to adjust for inflation, or using the wrong decimal format (e.g., dividing by 3.5 instead of 0.035).
Examples (Pre-Tax, 3.5% SWR):
- Germany: €35,616 / 0.035 = €1,017,600
- France: €30,528 / 0.035 = €872,229
- Spain: €21,624 / 0.035 = €617,829
Try the same calculation with 4% and 3% withdrawal rates to see the impact:
- Germany (4%): €35,616 / 0.04 = €890,400
- Germany (3%): €35,616 / 0.03 = €1,187,200
Step 4: Adjust for Local Taxes on Withdrawals
What to do: Find out how much tax you’ll pay on investment withdrawals or capital gains in your country. Increase your FIRE number so your after-tax withdrawals meet your real spending needs.
- Look up your country’s investment tax rates (see official tax authority websites)
- Calculate the gross amount needed to net your annual expenses
Why it matters: Taxes can reduce your effective withdrawal rate by 20–30% in some countries. If you ignore taxes, you risk falling short.
What can go wrong: Not factoring in the effect of progressive tax brackets, or assuming all income is taxed at the same rate.
Example Calculations (2026 rates, approximate):
- Germany: 25% capital gains tax + 5.5% solidarity surcharge ≈ 26.375%. To net €35,616/year:
Gross needed = €35,616 / (1 - 0.26375) ≈ €48,372/year
Adjusted FIRE number (3.5% SWR): €48,372 / 0.035 ≈ €1,381,914 - France: 30% flat tax on investment income. To net €30,528/year:
Gross needed = €30,528 / 0.7 ≈ €43,611/year
Adjusted FIRE number: €43,611 / 0.035 ≈ €1,246,029 - Spain: 19% capital gains tax (first €6,000), 21% (€6,001–€50,000), 23% (€50,000+). Assume effective rate ≈ 21%. To net €21,624/year:
Gross needed = €21,624 / 0.79 ≈ €27,381/year
Adjusted FIRE number: €27,381 / 0.035 ≈ €782,314
Pro Tip
Check out our Must-Know FIRE Tax Strategies for Europeans for legally reducing your FIRE tax drag.
Step 5: Automate and Track Your FIRE Number
What to do: Set up a spreadsheet or use a FIRE calculator to automate these calculations. Update your expenses, tax rates, and withdrawal rate each year.
- Spreadsheet: Download a template such as the FIRECalc Excel Sheet (adapt for EUR and local taxes).
- Apps: Use Trade Republic or DEGIRO for tracking investments.
- Fintech Tools: Platforms like Revolut and N26 offer spending analytics to keep your expenses in check.
Why it matters: Your FIRE number will change as your life, expenses, and tax rates change. Automation saves you from manual recalculations and keeps you on track.
What can go wrong: Relying on outdated data, or not updating for major life changes (marriage, kids, moving countries).
Pro Tip
For step-by-step automation, see our guide on How to Automate FIRE Savings and Tracking with European Fintech Apps.
Common Mistakes
- Ignoring taxes: Always run the calculation with your after-tax expenses, not just pre-tax.
- Underestimating inflation: Use at least 2–3% annual inflation in your forecasts.
- Forgetting healthcare/insurance: Especially important for early retirees before state coverage kicks in.
- Not updating your plan: Revisit your FIRE number at least once a year, or after major life events.
- Assuming the 4% rule is universal: Withdrawal rates depend on local taxes, investment returns, and your own risk tolerance.
Next Steps
- Read our Ultimate European FIRE Guide for a full overview of the FIRE journey in Europe.
- Explore Best Passive Income Ideas for Europeans to diversify your income streams.
- Consider your tax situation in detail with The Tax Advantages and Pitfalls of EUR-Based Income for FIRE Seekers in Europe.
- Set up a savings plan and automate your tracking for less stress and more consistency.
- Stay updated: Tax laws and investment products change—bookmark official resources for your country and review annually.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always do your own research and consider consulting a qualified financial advisor before making investment decisions.