Financial Independence and Early Retirement $($FIRE$)$ Calculation Objective:The purpose of this assignment is for students to explore and understand the concept of Financial Independence and retire Early $($FIRE$).$ You will apply this concept by calculating the FIRE number for yourself where you live in Saudi Arabia and want to retire early. Example Scenario: Starting age: $25$ Retirement age: $45(20$ years to save$)$ Year expense is $240$k Yearly earnings are $30$k Calculate FIRE number: A Fahad starts his career at $25$ and plans to retire at $45.$ He aims to maintain an annual lifestyle that costs SAR $240,000$ after retirement. He will invest their savings in a diversified portfolio with an average annual return of $7\%$ from investing in stocks, bonds, and mutual funds. Instructions: $1.$ Understanding FIRE and the $4\%$ Rule: Define Financial Independence and Early Retirement $($FIRE$).$ Explain the $4\%$ rule and its significance in determining how much one needs to save for retirement. Research and briefly discuss how the FIRE movement might apply differently in Saudi Arabia compared to other countries. $2.$ Calculating the FIRE Number: Using the $4\%$ rule, calculate the FIRE number for the individual in the scenario. Show all steps in your calculations. Formula to use: Where: S $=$ monthly savings r $=$ monthly rate of return $($assuming $7\%$ annual return, monthly $0\mathrm{.}07/12=0\mathrm{.}00583$ n$=$ total number of months $(20$ years $=240$ months$)$ FIRE number $=$ SAR $1$ Million $-$ Calculate how much this person needs to save by age $45$ to cover their SAR $240,000$ annual expenses in retirement. Savings and Investment Strategy: $-$ Determine how much the person needs to save annually to reach their FIRE number by age $45.$ Assume they invest their savings and earn a $7\%$ annual return on investment. $-$ Use online calculators or investment formulas to estimate how much they need to save each year, considering a $7\%$ return. Discussion: Discuss the feasibility of this savings plan in the context of the average income levels in Saudi Arabia. What strategies can be employed to reach such a high savings rate? Discuss at least two options $($e$.$g$.,$ cutting expenses, increasing income$).$ Consider factors that could affect the FIRE plan $($e$.$g$.,$ inflation, unexpected life events, or changes in investment returns$).$ Conclusion Summarize the key learnings from the assignment. Offer a reflection on whether early retirement is achievable for most individuals in Saudi Arabia and provide suggestions for improving financial planning. This assignment will help you apply the FIRE concept in a practical context and develop financial planning skills useful for early retirement strategies.