Before You Start
- Basic understanding of personal budgeting (income vs. expenses)
- Knowledge of your current annual spending in EUR
- Access to a European investment platform (e.g., Trade Republic, DEGIRO, Scalable Capital)
- Understanding of local taxes and healthcare costs in your country
- Calculator or spreadsheet (Excel, Google Sheets, or similar)
Time needed: 30–60 minutes
What you'll need: Your recent bank statements, a calculator or spreadsheet, and access to your investment platform account
The FIRE (Financial Independence, Retire Early) movement is growing in Europe, but most guides are US-focused. Calculating your FIRE number as a European requires adjustments for our unique tax systems, healthcare models, and cost of living. This tutorial walks you through every step to calculate your personalized FIRE number in EUR, with actionable examples from Germany and Spain.
Step 1: Calculate Your Annual Spending
What to do: Gather your last 12 months of expenses. Categorize them (housing, food, healthcare, transport, leisure, etc.) and total your annual spending in EUR.
Why it matters: Your FIRE number is based on your annual expenses. If you underestimate, you risk running out of money. If you overestimate, you may work longer than necessary.
What can go wrong: Missing irregular expenses (e.g., car repairs, gifts) or not accounting for future lifestyle changes.
| Category | Germany (Single, Berlin) | Spain (Couple, Valencia) |
|---|---|---|
| Rent/Mortgage | €900 | €850 |
| Utilities & Internet | €130 | €110 |
| Groceries | €250 | €400 |
| Healthcare (public + private) | €100 | €160 |
| Transport | €80 | €70 |
| Leisure & Holidays | €200 | €250 |
| Other | €90 | €100 |
| Total Monthly | €1,750 | €1,940 |
| Total Annual | €21,000 | €23,280 |
If you use a budgeting app like YNAB or your bank’s built-in analytics, export your data for accuracy.
Pro Tip
Include a 10% buffer for unexpected costs. Multiply your total annual expenses by 1.1 for safety.
Step 2: Adjust for Taxes and Healthcare
What to do: Determine if your expenses are net (after-tax) or gross (before-tax). For FIRE, always use net expenses. Next, review your expected healthcare needs. In many European countries, retirees pay into public or private health insurance.
Why it matters: Underestimating taxes or healthcare can derail your FIRE plan, especially if you plan to move countries or lose employer-sponsored coverage.
What can go wrong: Forgetting that some expenses will change after retirement (e.g., commuting, employer health insurance, or new taxes on investment income).
- Germany: Public health insurance for retirees (gesetzliche Krankenversicherung) typically costs 14–15% of pension income; private insurance can be higher for older adults.
- Spain: Non-working residents can join the Convenio Especial for public health, costing €60–€157/month per adult, or use private insurance.
Add estimated healthcare costs to your annual spending if not already included.
Step 3: Factor in Inflation
What to do: Adjust your annual spending upward to account for future inflation. In Europe, a 2% annual inflation rate is a realistic long-term average, though recent years have been higher.
Why it matters: FIRE is a long-term plan. If you don’t adjust for inflation, your purchasing power will shrink over time.
What can go wrong: Using today’s prices for a retirement that may be 10–20 years away.
To calculate future expenses, use this formula:
Future Expenses = Current Expenses × (1 + Inflation Rate) ^ Years Until Retirement
Example: If you plan to retire in 15 years, with current annual expenses of €21,000 and 2% inflation:
Future Expenses = €21,000 × (1.02)^15 ≈ €28,250
Pro Tip
Use a spreadsheet: In Excel or Google Sheets, enter =21000*(1.02^15) to get the answer instantly.
Step 4: Choose a Safe Withdrawal Rate
What to do: Select a safe withdrawal rate (SWR), which is the percentage of your portfolio you can withdraw each year without running out of money. The classic “4% rule” comes from US studies, but many European experts recommend 3.5–4% due to lower expected returns and higher taxes.
Why it matters: Your SWR determines how large your FIRE number needs to be. A lower SWR means you need a bigger nest egg.
What can go wrong: Using an overly optimistic rate, or forgetting to adjust for taxes on investment returns.
- 3.5% SWR: Conservative, suitable for early retirees or uncertain markets.
- 4% SWR: Moderate, used in most FIRE calculations but best for traditional retirement age.
Example: For €28,250 annual expenses and a 3.5% SWR:
FIRE Number = €28,250 ÷ 0.035 = €807,143
Step 5: Calculate Your Personalized FIRE Number
What to do: Plug your future (inflation-adjusted) annual expenses and chosen SWR into the formula above.
Why it matters: This is your target portfolio size to reach financial independence.
What can go wrong: Not updating your FIRE number as your life or expenses change.
Scenario 1: Single in Germany (Berlin)
- Current annual expenses: €21,000
- Years to retirement: 15
- Inflation rate: 2%
- Future annual expenses: €28,250
- Chosen SWR: 3.5%
- FIRE Number: €807,143
Scenario 2: Couple in Spain (Valencia)
- Current annual expenses: €23,280
- Years to retirement: 10
- Inflation rate: 2%
- Future annual expenses: €28,386
- Chosen SWR: 4%
- FIRE Number: €709,650
Step 6: Plan Your Investment Strategy
What to do: Set up a regular investment plan (e.g., monthly ETF savings plan) on a European broker such as Trade Republic or DEGIRO.
Why it matters: Consistency and low fees are critical for reaching your FIRE number.
What can go wrong: Picking expensive or tax-inefficient funds, or missing contributions.
- Open your broker app (e.g., Trade Republic).
- Tap Portfolio → Savings Plan → Select ETF (e.g., iShares Core MSCI World UCITS ETF, ISIN: IE00B4L5Y983).
- Set your monthly contribution (e.g., €500/month).
- Confirm and activate the plan. You should now see your first ETF purchase confirmed with a value of approximately €500 (minus any fees).
Pro Tip
Choose accumulating (Acc) ETFs to simplify reinvesting dividends and minimize tax reporting in many European countries.
Common Mistakes
- Ignoring taxes and healthcare: These can be major expenses, especially if you retire abroad.
- Not updating for inflation: Your FIRE number will be too low if you use today’s prices for future planning.
- Overestimating withdrawal rates: 4% is not always safe in Europe. Err on the side of caution, especially if retiring early.
- Using the wrong investment products: Some funds are not tax-efficient for Europeans. Always check that your ETFs are UCITS-compliant.
- Failing to review regularly: Recalculate your FIRE number at least annually or after major life changes.
Next Steps
- Track your spending monthly and update your FIRE number each year.
- Learn more about the nuances of retiring early in Europe by reading Can You Really Retire Early with the FIRE Strategy in Europe? 2026 Case Studies.
- If you’re considering living abroad, see The FIRE Movement for European Expats: How to Retire Early While Living Abroad for key considerations.
- Set up or review your investment plan using a European broker. Consider automating your savings for consistency.
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.