Financial independence: 1. work out the spending to cover
A €4,000 net salary and €2,000 in spending give different replacement targets. In this fictional example, the portfolio pays for spending; the share of salary previously saved does not automatically become an additional expense.
The monthly need brings together housing, food, transport, healthcare and other household spending. An annual insurance bill enters this budget through its monthly equivalent. Repairs or replacing a car can also affect the average, even when no payment appears this month.
This budget describes the intended life after work stops. A daily commute may disappear; another expense may arise. The result changes when these items change.
Starting amounts are stated in today's money. The European Central Bank explains that inflation reduces the purchasing power of money, with different effects according to each household's spending, on a page consulted on 14 September 2026. The timeline calculation will adjust amounts for this change.
The target portfolio depends on the spending it will fund, and the current salary alone does not tell us what that spending will cost.
Starting capital: 2. separate net worth from available money
The calculation starts with the capital allocated to funding these expenses. Total net worth may include a main home, while the model assumes a portfolio from which money can be withdrawn.
An occupied home provides somewhere to live. Its value becomes available money only through a separate transaction, such as a sale, which also changes housing costs. Counting its value in the portfolio while assuming continued use of the same home at no cost would describe an inconsistent situation.
Money set aside for a near-term expense raises another question: the same euro cannot fund two projects at once. An amount reserved for repairs and included in starting capital would show a larger portfolio than the one remaining after the bill is paid.
The main scenario starts with €0 invested. A variation starts with €100,000 while keeping every other input unchanged. The timeline table shows the effect of that single change, without assuming that this capital exists in your situation.
Starting capital measures the money allocated to the scenario, rather than the value of everything you own.
Monthly saving: 3. measure what feeds the portfolio
In the fictional scenario, investing €2,000 out of €4,000 in monthly net income gives a savings rate of 50%. This division describes the share of income paid into the portfolio: 2,000 / 4,000.
The amount invested and future spending remain separate inputs. Higher income can increase contributions without changing the future spending need; lower expenses can increase contributions while reducing that need. These changes therefore produce different calculations.
The guide to the savings rate explains this relationship between income, contributions and spending. Here, the rate makes the budget easier to read, without setting a percentage suited to an individual.
The model assumes regular contributions that increase with inflation. This preserves their purchasing power. A standing order kept at the same nominal amount throughout the period would not match this assumption and would produce a different timeline.
A loss of income, leave from work or funding a purchase can reduce contributions. The constant scenario assigns no dates to these events; its result assumes they do not interrupt the planned saving.
Monthly saving is a flow into the portfolio, and its regularity forms part of the timeline's assumptions.
FIRE number: 4. turn spending into a target portfolio
The FIRE number is the scenario's target portfolio. With no tax on withdrawals, the calculation used here divides annual spending by the withdrawal rate less annual fees.
At €2,000 a month, annual spending is €24,000. The assumed 4% withdrawal rate, less 0.25% in fees, leaves 3.75% for spending: 24,000 / 0.0375 = €640,000.
The table applies this same formula to three fictional spending needs. All amounts are in today's money; the rates are assumptions chosen for the illustration.
| Monthly need | Annual need | Rate after fees | Target portfolio |
|---|---|---|---|
| €1,500 | €18,000 | 3.75% | €480,000 |
| €2,000 | €24,000 | 3.75% | €640,000 |
| €2,500 | €30,000 | 3.75% | €800,000 |
The formula shows what an assumption costs. It does not demonstrate that the rate will hold throughout retirement. The guide to the 4% rule explains where this reference point comes from and the limits of historical studies.
Fees continue during withdrawals here: that is a model convention. If a chosen withdrawal rate already includes fees, subtracting them again would count them twice.
The FIRE number is a conditional division: annual spending divided by the rate available to fund it.
Independence timeline: 5. include returns, inflation and fees
The main scenario assumes €0 in starting capital, €2,000 contributed each month and a monthly need of €2,000. Annual assumptions are a 6% return before fees, 2% inflation and 0.25% in fees, with a 4% withdrawal rate and withdrawal tax set to 0%.
That last rate isolates the other inputs. It describes no country's tax system and is not an estimate of your tax liability.
The calculations dated 14 September 2026 use the quick-mode engine, which applies returns after fees month by month. The target portfolio and contributions rise with inflation. The timeline ends at the first crossing of the target; the month of the first contribution counts as month 1.
| Only change from the main scenario | Target portfolio in today's money | Displayed timeline |
|---|---|---|
| None | €640,000 | 18 years 9 months |
| Monthly contribution of €1,000 | €640,000 | 29 years 10 months |
| Starting capital of €100,000 | €640,000 | 14 years 10 months |
| Assumed return of 4% | €640,000 | 22 years 1 month |
| Annual fees of 1% | €800,000 | 23 years 5 months |
The last row combines a lower return after fees with a higher target. The SEC's bulletin of 23 July 2025 on fees, consulted on 14 September 2026, explains why charges also reduce the capital earning subsequent returns.
In the main scenario, the target in the arrival month reaches about €926,225 in that month's euros and funds about €2,894 a month at that time. With the assumed inflation, their purchasing power matches the initial €640,000 and €2,000. The larger future amount therefore does not describe a higher standard of living.
A date changes with its assumptions, and two amounts expressed in the money of different periods cannot be compared directly.
Calculation limits: 6. interpret the date in real life
The engine calculates a target crossing. It does not simulate possible portfolio depletion throughout the withdrawal period and gives no probability of success.
A constant return removes fluctuations. If assets are sold to fund spending during a fall, the assets sold no longer participate in any recovery. A date produced by a smooth curve does not test this path.
Pensions are absent from this scenario. For a career spanning several European Union countries, Your Europe explains that rights can be spread across several systems and that payment ages differ, on a page consulted on 14 September 2026. Stopping work and starting to receive each pension are therefore separate events.
A pension can reduce the need funded by the portfolio from the time payments begin. Subtracting it from the outset would erase the years during which it is not yet paid.
Tax residence matters too. According to Your Europe, tax rules depend on the countries involved and tax residence can lead to taxation of worldwide income, on a page consulted on 14 September 2026. The country paying the salary therefore does not determine the tax on future withdrawals by itself.
Quick mode simplifies this tax: when a rate is entered, it treats every withdrawal above the allowance as taxable, without distinguishing returned capital from capital gains. The financial independence calculator provides an educational estimate whose scope depends on these conventions.
The model's date neither opens pension rights nor proves that the portfolio will fund every future year.
Frequently asked questions
How much does financial independence require at €2,000 a month?
In the example, the target portfolio is €640,000 in today's money: €24,000 a year divided by 3.75%, after subtracting 0.25% in fees from the assumed 4% rate. This amount assumes no tax on withdrawals. It changes with spending and the rates entered, and is not a universal threshold for independence.
Does the FIRE number represent all my net worth?
Here, it represents the portfolio intended to fund the scenario's spending. The value of an occupied home, money reserved for repairs or pension rights do not automatically become capital available for withdrawals. Including them requires a description of the corresponding cash flows and their timing, which this simple projection does not provide.
How many years does financial independence take?
The scenario with €0 in starting capital and €2,000 in monthly contributions displays 18 years and 9 months under the stated assumptions. The same calculation displays 29 years and 10 months when only the contribution falls to €1,000. The timeline therefore depends on the inputs; it does not measure the period a real person will experience.
Does the calculation include the Luxembourg pension?
No. The scenario funds the entire need from the portfolio. A future pension can reduce that need once payments start, but its amount and payment date are absent from the calculation presented. For a cross-border worker or expat, several pensions can start at different times, according to the rights established in each system.
Key points
- The calculation starts with spending, then separates capital already available from future contributions.
- The FIRE number depends on the assumed withdrawal rate, fees and tax.
- The example's €640,000 is expressed in today's purchasing power.
- Timelines assume regular returns and contributions; they do not test the entire withdrawal period.
- Pensions and changes of residence require amounts and dates that this scenario does not describe.