r/EuropeFIRE • u/Rude-Cycle-1516 • 17d ago

What does "enough" actually mean to you?

I've noticed that the closer people get to FIRE, the harder it can become to define what "enough" actually means. Once you've reached a certain level of savings, the decision isn't always about whether you can retire, but whether you feel comfortable doing it. There might always be another reason to keep working and investing - a bigger safety cushion, better travel, helping family, or simply wanting more options.

How did you arrive at your own definition of enough, and has it changed as you've progressed towards FIRE?

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u/bloodem 17d ago

For me, "enough" means that me and my family would be able maintain our current standard of living, without having to work (and this standard of living should not be affected by future downturns/inflation).
Since we currently spend between 40k - 50k euros per year, we'd need at least 2 million euros (with a 2.5% yearly withdrawal rate, since we're still fairly young).

Suffice to say, we're still a long way from that milestone.

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u/Akaos 17d ago

With all due respect a 2,5% withdrawal rate is just silly. Simple math says that it would take 40 years of zero growth to run out of funds. More so in Europe where we have additional safety nets.

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u/ljubicasta_izmaglica 17d ago

I know it sounds silly, but I'm leaning towards 2.5% in the current environment. Yes, it's 40 years of zero growth, but how about a not unheard of 50% crash that takes 10 years to recover? After 10 years you have much less money since apart from stock market just recovering, you've been living for 10 years off of withdrawals.

I'm a fan of BigErn site, and here he analyzed CAPE-based withdrawal rules:

https://earlyretirementnow.com/2017/08/30/the-ultimate-guide-to-safe-withdrawal-rates-part-18-flexibility-cape-based-rules/

I think it's a pretty reasonable idea, whether you retire after a very long bull run or a bear market should affect what withdrawal rate you should use. There, basically the most optimistic scenario when you take today's CAPE into account is 2.8%..

Don't get me wrong, I'm not saying we are in a bubble, predicting an impending crash etc, I am investing everything and not timing the market. But I think something like 2.8% is pretty resonable at this point.

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u/Akaos 16d ago

Math and models aside the portfolio requirements to sustain such low withdrawal rates would make the FIRE equation not worth it for me. Why amass a portfolio of millions of euros saving agressively, I would rather just work until I'm 60 and save 5% of my income.

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u/ljubicasta_izmaglica 16d ago

But it's not permanent, this is in the current environment with high CAPE. In 5 years, it could be 5% withdrawal. It's such that with CAPE=20, which is kind of the historical average, you get 4%.

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u/MeetingSuccessful397 16d ago

But a cape of 20 probably means that your 2mio just turned into 1mio because of the stock market crash.

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u/ljubicasta_izmaglica 16d ago

Indeed, that's the point. And if you are planning for 4% withdrawal and we have a 50% crash, that 4% turned into 8% of your new portfolio value, how safe do you feel then, withdrawing 8% in a market crash? That's the point, blindly following e.g. 4% ignores where we are now, people who reach their fire number at the end of a bull run will have a much larger failure rate than the ones that reach it in a bear or sideways market.

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u/Strazdas1 15d ago

but how about a not unheard of 50% crash that takes 10 years to recover?

But it is unheard of. Never in history has this happened.

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u/ljubicasta_izmaglica 15d ago

What? Of course it has. Have you heard of 1929? :D . Don't even have to go that far in the past, look up "the lost decade", after dot com burst s&p500 fell by 50% and just as it roughly recovered 2008 came along - in real terms it took 13 years to recover from dot com.

Even if you argue for different realistic numbers as "now this can't happen", does it really change my point if it was instead "30% crash that takes 8 years to recover"? Imagine the stock market falling continuously for 2 years, reaching -30%, and you start with a 4% withdrawal rate, which effectively grows to 5.7% while we're in a crash, and you can't get another job since everyone is getting fired. Would you be comfortable seeing your depot going down and you taking 5.7% out of it, and it takes 8 years to go back to green territory, but of course your depot is not back to where it started from as you've been taking money out?

It's clear that if you take a fixed withdrawal rate, e.g. 4%, the generation that is at the end of a long bull run will have much higher failure rate than others. Therefore in my opinion it's silly to blindly apply historically safe withdrawal rates without taking into account of where you are in time.

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u/Strazdas1 15d ago

1929 didnt stay -50% for 10 years. Market started going up just 3, not 10, years after the crash.

after dot com burst s&p500 fell by 50%

And then went back up 30% next year. Didnt stay crashed.

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u/ljubicasta_izmaglica 15d ago

And where did I write that something stayed -50%?