How to calculate Fi number with pension?

To calculate your FI (Financial Independence) number when you have a pension, you need to consider how much of your expenses are covered by the pension. The basic steps are:

1. Determine Annual Expenses: Calculate your total annual expenses.
2. Subtract Pension Income: Subtract the amount covered by your annual pension income from your total annual expenses.
3. Calculate FI Number: Multiply the remaining amount by 25 (this is based on the 4% rule).

Here's how it looks in practice:

• Total Annual Expenses: $60,000
• Pension Income: $40,000
• Remaining Expense to Cover: $20,000 ($60,000 - $40,000)
• FI Number: $500,000 ($20,000 * 25)

This method adjusts your FI number to account for the guaranteed income from your pension, reducing the amount you need to save outside of the pension 1 2 3.

For further details and examples, you can refer to multiple episodes on the ChooseFI podcast, where Brad Barrett and Jonathan Mendosa discuss this in depth. Specifically, they recommend the book The Golden Albatross by Grumpus Maximus, which delves into evaluating pensions and their impact on your FI journey 4.