Disclaimer

FIRE Sim is someone's side project to help validate weather FIRE is feasible. It is not professional financial advise.

Running numbers by a Certified Financial Advisor before making substantial life changes like retiring early is recommended.

What is FIRE Sim?

FIRE stands for Financially Independent Retire Early.

It is a retirement strategy where practitioners save a large percentage of their income to build a large nest egg. Once a large nest egg is built and frugal lifestyle changes are made, practitioners can retire early because the nest egg will support them for several years.

The key to making the nest egg last several years is allocating the nest egg for continued growth and keeping expenses low. FIRE Sim is a tool that simulates a retiree's withdrawals, equity gains, and nest egg balances from retirement up to age 100 to validate whether the practitioner's nest egg will last throughout retirement.

FIRE Sim is an opinionated tool about interest rates and withdrawal methods, explained in more detail below.

We plan on making FIRE Sim more configurable. If you would like to be informed when we add new features, please add your email to our email list. We promise we won't SPAM you. We use your e-mail to gauge interest to determine whether adding new features will be worth our effort.

Historical Data

We use historical gains from Vanguards Total Stock Market (VSTAX) and Total Bond Market (VBTLX) between 2000 and 2024 to simulate returns. Each age is mapped to a historical gain record. A retirement timeline usually lasts longer than our historical gains data, so we replay from the beginning again until age 100.

Example

Age	Year
35	2001
36	2002
...	...
55	2022
56	2023
57	2024
58	2001
...	...
99	2017
100	2018

We prefer to start at year 2022 because both equities experienced double percentage losses. A simulated portfolio withstanding large losses its first year and last throughout retirement is a good indicator the FIRE practitioner's equities can support their annual expenses.

The tool allows starting the historical year at different times. Historical data is available here.

Withdrawals

We assume the inflation rate is fixed at 2% per year and increase a retiree's spending by the same amount each year.

A common FIRE withdrawal method is withdraw 4% from their nest egg the first year of retirement then withdraw the same amount adjusted for inflation each year. This method works but each time a retiree sells equities, the capital gains are subject to capital gains taxes.

FIRE Sim optimizes for less capital gains tax. It assumes a retiree's equities provides 2% of annual dividends then withdraws the remaining annual expenses. This results in less equities sold, resulting in less capital gains taxes

Asset Allocation

Financial literature recommends a 60/40 stock/bond split for equities support a retiree's expenses for 30 years. This is the default setting.

While testing FIRE sim with our own financials, we saw we might run out of money starting from historical year 2022. More research found a Glide Path Asset Allocation method where stocks are allocated log₁₀₀(age). This means stocks are weighted at a higher percentage earlier in the retirement window and "glides" towards bonds as the retiree reaches 100 years.

It's more advanced and recommend using fixed allocation, but Glide Path Asset allocation allowed our own financials to make it through a retirement window where the first year experienced double-digit losses. We thought it would be a good option to have.