How much money do you need to retire early?

In a world that is full of economic uncertainties, one can never know for certain how much money they would need in order to retire early and still live comfortably, but financial experts now say that there is a number that can be calculated, which can take you close. The FIRE (financial-independence-retire-early) number is a concrete figure that can tell one the amount of money that they would need, if they were to leave their job right now and retire.

Grant Sabatier, creator of financial site Millennial Money and the author of "Financial Freedom" says that there is a shortcut to doing the math. Your FIRE number is nothing but your expected annual expenses multiplied by 25. For instance, if your expenses for the year amount to 4 lac takas, multiplying that by 25 would get you to a crore, or 10 million. This is the number you would need to earn financial independence, in order to be able to retire and live comfortably off.

However, this calculation is based on a number of different assumptions and there are a range of other factors to consider, based on one's personal financial situation.

The FIRE number, for instance, is based on a study conducted in 1998 called the Trinity Study. It was found in almost all the cases, a safe rate of withdrawal for retirees per year was 4 percent, without depleting their savings significantly or risk running out of money.

The research conducted then was for a time frame of 30 years and the life expectancy of people is much higher now. The updated calculations now show that people can still live off 3.5-4 percent of their savings annually while their portfolio continues to grow. For an extended retirement, one should aim to withdraw between 3.3-4 percent per year, the lower, the better, considering inflation and other unforeseen circumstances.

It goes without saying that such a huge life decision should be based on more than just a simple one-step calculation. For one thing, one must take a long, hard look at their spending habits. Being realistic, and overestimating, rather than underestimating is prudent. Second, life has a way of throwing curveballs when one least expects it. Therefore, the potential retiree must leave some legroom for flexibility. Finally, experts say that a big figure can get daunting for many but breaking savings into one-to-two-year chunks can be significantly less overwhelming.