Before You Start
- Basic understanding of personal finance principles
- Access to your annual expenses (estimate or actuals, in EUR)
- Knowledge of local tax rates and healthcare costs (public/private)
- Calculator (online or spreadsheet)
- Optional: Access to a broker such as Trade Republic, DEGIRO, or Scalable Capital
Time needed: 45–60 minutes
What you'll need: Calculator, pen & paper or spreadsheet, internet access
Reaching FIRE (Financial Independence, Retire Early) is a major financial goal for many Europeans. But how do you actually calculate your FIRE number in Europe—the amount you need invested to safely quit your job and live off your portfolio? Unlike US-focused guides, this tutorial breaks down every step for Europeans, including taxes, healthcare, and cost-of-living considerations. If you want the full context of wealth-building in Europe, see our Ultimate Guide: How to Build Wealth in Europe from Scratch in 2026. Here, we’ll go deep on FIRE calculation—step-by-step, with actionable EUR-based examples.
Step 1: Calculate Your Annual Spending Needs (in EUR)
What to do: List all expected annual expenses in retirement, in today's euros (€). Include housing, food, transport, holidays, insurance, taxes, and especially healthcare (public and/or private). Use actual numbers from your current budget, or estimate for your target lifestyle.
- Rent/Mortgage: €10,800/year (€900/month, Berlin)
- Groceries & Eating Out: €4,800/year
- Transport: €1,200/year
- Travel: €2,000/year
- Healthcare (private insurance): €2,400/year
- Other (clothes, hobbies, etc.): €1,800/year
- Taxes: €1,800/year (see Step 3 for details)
Total: €24,000/year
Why it matters: Your FIRE number is only as accurate as your spending estimate. Underestimating expenses is the #1 reason FIRE plans fail. Don’t forget to account for inflation (more in Step 5).
What can go wrong: Underestimating future costs (e.g., healthcare, rent increases), forgetting irregular expenses (car repairs, gifts), or ignoring local inflation.
Pro Tip
Review the last 12 months of bank statements to spot hidden or irregular expenses. For pan-European living, consider the higher cost base of the country you plan to retire in (e.g., Portugal vs. Netherlands).
Step 2: Decide on Your Safe Withdrawal Rate (SWR)
What to do: Choose the percentage of your portfolio you’ll withdraw each year. The classic US-based rule is 4%, but European investors face different tax and market conditions. Many experts suggest a more cautious 3.5% or even 3% for Europe in 2026, to account for lower expected returns and higher taxes.
Why it matters: The lower your SWR, the more money you need to retire safely. Choosing too high a rate risks running out of money; too low may delay FIRE for years.
What can go wrong: Using an unrealistic SWR (e.g., 4% in high-tax, low-growth environments). Not adjusting for local investment returns or taxes.
Pro Tip
Use a conservative SWR (3–3.5%) if you expect long retirement, volatile markets, or plan to live in high-tax/high-inflation countries. You can model different rates using the Engaging Data FIRE Calculator.
Step 3: Adjust for Taxes and Healthcare (Europe-Specific)
What to do: Estimate your tax liability on investment withdrawals. In Europe, taxes vary sharply by country and account type (e.g., standard brokerage vs. tax-advantaged accounts like a French PEA or German ETF-Sparplan). For healthcare, include public insurance contributions or private insurance premiums.
Example: In Germany, investment income (ETFs, stocks) is taxed at 26.375% (Abgeltungsteuer plus solidarity surcharge). In the Netherlands, Box 3 wealth tax applies. In Spain, capital gains tax rates start at 19%. Estimate your annual tax bill based on your planned withdrawals.
Why it matters: Taxes and healthcare are often the biggest surprise expenses for European FIRE aspirants. Underestimating these can cause your real withdrawal rate to overshoot your target.
What can go wrong: Assuming zero tax (common with US-based guides), or only considering capital gains and forgetting about dividend taxes, wealth taxes, or mandatory healthcare contributions.
Pro Tip
Check your country’s tax authority or use DEGIRO’s tax overview for investment account tax guidance. If you plan to move countries post-FIRE, research both countries’ tax rules on foreign income and residency.
Step 4: Calculate Your FIRE Number
What to do: Divide your post-tax annual spending by your chosen SWR. The formula:
FIRE Number = (Annual Spending in EUR) / (Withdrawal Rate)
Example 1 (Single, Moderate Lifestyle):
- Annual spending: €24,000
- SWR: 3.5% (0.035)
FIRE Number = €24,000 / 0.035 = €685,714
Example 2 (Couple, Higher Cost Country):
- Annual spending: €40,000 (incl. higher rent, two people, private healthcare in Ireland)
- SWR: 3% (0.03)
FIRE Number = €40,000 / 0.03 = €1,333,333
Why it matters: This number is your target portfolio value for financial independence. It’s your “magic number”—the amount you need invested to retire without new income.
What can go wrong: Forgetting to use post-tax spending; using a SWR that’s too aggressive; not updating your number as your lifestyle or country changes.
Pro Tip
Use a spreadsheet (Google Sheets or Excel) to test different scenarios—change your annual expenses or SWR to see how your FIRE number shifts. You can also try the MMM FIRE Calculator or the Networthify Calculator for more advanced modelling.
Step 5: Factor in Inflation and Currency Risk
What to do: Adjust your FIRE number upwards to account for inflation (typically 2–3% per year in Europe). If your investments or retirement plans involve multiple currencies (e.g., living in Spain but investing in USD ETFs), add a buffer for currency risk.
Example: If you plan to retire in 10 years and expect 2% inflation, your €24,000 annual spending will rise to:
Future Expenses = €24,000 × (1.02^10) ≈ €29,268
Recalculate your FIRE number with this new figure.
Why it matters: Ignoring inflation means your real purchasing power drops over time. Currency swings can also erode your portfolio if you invest in non-EUR assets.
What can go wrong: Calculating your FIRE number using today’s prices, then falling short in the future; ignoring currency fluctuations if investing abroad.
Pro Tip
Choose EUR-denominated accumulating ETFs (like iShares Core MSCI World UCITS ETF EUR Acc (EUNL)) to reduce currency risk and simplify tax reporting. You can set up a savings plan in Trade Republic by tapping Portfolio → Savings Plan → Select ETF.
Step 6: Track Your Progress and Adjust
What to do: Regularly update your expenses, tax situation, and portfolio value. Adjust your FIRE number if your lifestyle or tax residency changes. Track your compound growth and monitor your investments using European-friendly platforms like Scalable Capital or DEGIRO.
Why it matters: Life changes—so should your FIRE plan. Tracking ensures you’re not surprised by inflation, tax changes, or market downturns.
What can go wrong: Never updating your number, missing tax law changes, or failing to rebalance your portfolio for risk.
Pro Tip
Automate your monthly investments with a broker like Trade Republic or Scalable Capital. Many offer commission-free ETF savings plans. You should see your ETF purchase and current value in your dashboard after each monthly contribution.
For more on tracking your progress, see How to Track Your Compound Interest Growth Over Time (With EUR Examples).
Common Mistakes When Calculating Your FIRE Number in Europe
- Using pre-tax spending instead of post-tax, post-healthcare costs
- Assuming US-based 4% SWR applies unchanged to Europe
- Ignoring inflation and currency risk
- Forgetting about wealth taxes (common in the Netherlands, Norway, Spain, Switzerland)
- Not modelling different retirement countries or lifestyles
- Assuming healthcare will be “free” after quitting work
- Not updating the FIRE number as your life changes
Next Steps
- Model your own scenarios using the calculators linked above
- Read our Top FIRE-Friendly ETFs for European Early Retirees in 2026 to choose tax-efficient, diversified investments
- Consider withdrawal strategies—see How to Use a Bucket Strategy to Fund Early Retirement in Europe
- Check out our Ultimate Guide: How to Build Wealth in Europe from Scratch in 2026 for the full roadmap
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.