T11Finance · Financial independence
FIRE: the real number
Everybody talks to you about FIRE with the 4% rule. Nobody explains that you have to do the real maths, with inflation, taxes and currency swings. Here we redo the calculation honestly, for your country and your currency.
Images generated by AI.
Start here: click one of the two questions below
1.3Start here: three questions
Question 1 sets the currency of the country where you live (used for the exchange rate); the currency of your amount is your choice, so pick the one you can picture easily; question 3 is the tax taken on your dividends and gains (details in section 3.2). Your amount and currency are yours: no conversion is made for you, and they can differ from the country's currency.
1.4How much you will need
1.4.1Change the assumptions
Type any 3-letter code (USD, EUR, THB, JPY…). If it differs from the currency you spend in, exchange-rate moves add to or eat into your income.
At 100%, inflation does not destroy your capital: at the end of the period it still buys as much as today, so you only spend what it earns above inflation. At 50%, half of it is protected. At 0%, your capital can be used up.
The number of years over which your capital must keep its buying power, and over which your withdrawals are tested. It depends on your age and plans: 20 years is a common choice.
The yearly rise in your cost of living. Your spending grows with it, and the protected part of the capital must grow with it to keep its buying power.
Yearly change of your capital and dividend currency against the currency you spend in. A minus sign means your income buys less each year. Not used if both currencies are the same.
The yearly rise in the value of your investments, before dividends. It also makes your dividends grow.
The yearly cash the investments pay out, as a share of their value. Tax is taken on it before you see it.
1.5How your capital evolves over 20 years
1.5.1The 4% rule
1.5.1.2How this chart is calculated
THE 4% RULE, AFTER REAL CALCULATION
THE 4% RULE, AFTER REAL CALCULATION
1.5.1.3Show every technical step: 4% rule
1.5.2The real calculation
1.5.2.2How this chart is calculated
THE REAL CALCULATION
THE REAL CALCULATION
1.5.2.3Show every technical step: real calculation
2Five ways to be FIRE
One acronym, five lifestyles. Pick yours in the simulator.
3The simulator
The idea: your income comes from dividends, without selling shares (one common way to live off a portfolio; the 4% rule itself assumes you also sell shares). Each year we track what is left once tax is paid, the exchange rate applied and inflation removed.
3.1Your profile
3.2Your tax (prefilled by question 3)
3.3Inflation and currencies
3.4The result
Simplified model: constant yield and growth, tax taken each year on the dividends, dividends not reinvested, no shares sold. It is neither a forecast nor investment advice.
3.5What your dividends buy, year after year
Everything is in your country's currency, at today's prices. The red line is what you need.
3.6Where your dividend goes
3.7What if the currency moves?
Same profile; only the exchange-rate drift between your dividend currency and yours changes.
3.8The detail, year by year
4The three thieves, plainly
4.1Tax
Taken before you count
A foreign dividend often suffers two levies: a withholding tax in the company's country, then your own country's tax. A tax treaty avoids paying twice… in theory. Social contributions, for their part, are usually not credited.
4.2Inflation
The price of your life rises
Your spending follows your country's inflation, not that of your shares' country. If your dividends grow slower than your bills, your coverage melts away, even though you never lose a cent.
4.3Currency
Dollars in, euros out
The dividend is paid in one currency, the rent in another. If the first falls against the second, your income falls on arrival, even when the company raises its dividend.
5Countries and rates used
These rates live in a data file, separate from the code. They are flat rates: your real situation (tax brackets, allowances, options) may differ. The "Status" column says whether the rate has been cross-checked against an official text.
5.1Country of tax residence
5.2Country of the companies paying the dividends
6The mistakes corner
The ones that give a nice curve and a bad awakening.