How do you actually know if you can afford to retire early?
TL;DR: You can afford to retire early once your invested savings meet or exceed your FIRE number (annual expenses ÷ safe withdrawal rate) — but "can afford it" should also survive a more conservative withdrawal rate and a sequence-of-returns stress check, not just the optimistic base-case number.
The minimum bar: your invested savings vs. your FIRE number
Calculate your FIRE number from your real annual expenses at your chosen safe withdrawal rate. If your current invested savings (not including your home or illiquid assets you're not planning to draw down) already meet or exceed that number, you've hit the basic financial bar for retiring on that specific withdrawal rate.
Why hitting the number exactly isn't the same as being genuinely ready
- Check it at a more conservative withdrawal rate too — if you only clear the bar at 4% but not at 3.5%, you're closer to the edge than a single "yes/no" check suggests.
- Check what a bad sequence of early returns would do — retiring right before a multi-year downturn is a real, historically documented risk, not a hypothetical one; a plan that only works if returns are smooth from day one isn't fully stress-tested.
- Separate essential from discretionary expenses — if your "current expenses" figure includes a lot of discretionary spending you'd genuinely be willing to cut in a bad year, your real minimum bar is lower and your effective safety margin is larger than the raw number suggests.
The healthcare question specifically
For anyone retiring before a country's standard retirement/healthcare-eligibility age, healthcare costs (and how you'll cover them without employer coverage) deserve their own explicit line item, not an assumption that they're already folded into "annual expenses" at the same inflation rate as everything else — healthcare costs have historically outpaced general inflation in many countries.
A practical two-step check
First, confirm your invested savings clear your FIRE number at your chosen withdrawal rate. Second, run the same check at a more conservative rate (3-3.5%) and against a sequence-of-returns stress scenario — if you still clear the bar under both, you're in genuinely strong shape, not just optimistically close.
Run both checks together
Our Retirement & FIRE Readiness Report calculates your FIRE number, your Coast FIRE status, and a sequence-of-returns illustration in one report — so you're checking readiness against more than one assumption, not just the optimistic base case.
Frequently asked questions
How do I know when I have enough to retire early?
When your invested savings meet or exceed your FIRE number — annual expenses divided by your chosen safe withdrawal rate — and that conclusion still holds at a more conservative withdrawal rate and against a sequence-of-returns stress check, not just the optimistic base-case number.
Should I include my house when calculating if I can retire?
Generally no, unless you specifically plan to sell or downsize it to fund retirement — most FIRE calculations focus on invested, liquid savings that can actually be drawn down for living expenses, not illiquid assets you intend to keep living in.
What's the biggest mistake people make when deciding to retire early?
Checking readiness against only one optimistic scenario — hitting the FIRE number at a single assumed withdrawal rate and a smooth average return, without checking whether the plan survives a more conservative withdrawal rate or a bad sequence of early returns.