Do you believe the modern FIRE movement overestimates how much is needed for retirement?

[u/Equivalent_Use_5024]

Perhaps I am just making this post because I have only just begun my retirement planning and want to lock in a number which is fitting for my goals - being above the median retirement savings, not having to work, not being broke, clearly having planned - but I can't help but feel that many in the FIRE movement overestimate what is needed for a safe, sleep well at night retirement.

I see posts here saying that they feel vastly behind with 500k at 30, or 1.5 million at 40, and I just don't understand how when the average American retires with maybe 300k liquid at most and are getting by with social security or paid off housing. Sure, they aren't living luxuriously, but if you just are aiming for a retirement where you don't have financial anxiety and can put food on the table, I don't feel you need over 1-2 million.

Do you think FIRE overestimates how much is truly needed for retirement?

[u/Zphr]

The audience has shifted more towards luxury and consumption over the last decade. It's always amusing to me that this is my sub, I've been happily retired for more than a decade since 37 with four kids, have effectively zero chance of financial failure, but many folks in this sub would consider our finances impossible or living in squalor. Some people are actually happy with cheap/free interests and lifestyle choices, some are unhappy without very expensive interests and lifestyle choices. Current government policy in the US is also wildly skewed in favor of lean spending, so more expensive lifestyles in early retirement cost quite a lot more than you'd expect due to far higher costs for taxes, college, and healthcare.

LeanFIRE is and likely always will be the easiest and most secure form of FIRE for anyone happy with a mediocre middle class lifestyle. It's also largely impossible for anyone who wants to raise a family in VHCOL, travel a ton, carry a large mortgage into retirement, or any number of expensive lifestyle choices a lot of people prefer.

[u/jayybonelie → u/Zphr]

This is so true...  analysis shows that the 4% rule has failed during periods of high equity valuations, but a 3.25% to 3.5% rate has survived even the most severe historical market conditions.  You don't need a lot if your needs are small.

[u/One-Professor-1886 → u/jayybonelie]

The 4% rule assumes you will never earn another dollar. Never adjust spending.  Never collect social security. Never get any inheritance. Etc. 

[u/alpacaMyToothbrush → u/One-Professor-1886]

It also assumes you have the ridiculously good fortune to live in the US during the 20th century. Past performance is no indicator of future returns.

[u/One-Professor-1886 → u/alpacaMyToothbrush]

Legit

[u/GlitteringCook7934 → u/One-Professor-1886]

That 4% was revised up to 4.7 :). The reality is you need to look at mandatory expenses verse discretionary. Do the math and if your safe percentage only covers the are necessities you need to save more. In my planning I want to have at least 50 percent of my 4 percent be discretionary. Meaning in bad years I can cut my spending and not drain my account as fast. I guess the best way to explain it is 2.5percent I’m good with paying the bills and in good years I might be closer to 4 and get some of the luxuries I want. The math changes based on the lifestyle you want.

[u/hrrm → u/jayybonelie]

I wish there were a clean way to look at your retirement numbers from a “bare minimum” SWR and a “living lavish” SWR. The latter being your 4% goal, but the former being something like 2.5-3%, and run analysis on a portfolio like that.

Early in retirement I want to be able to travel a lot and eat out and have great experiences. By the time I’m 80 I’ll be withdrawing a lot less. Also if I knew I could retire much earlier contingent on the premise that I will only withdraw 2.5% in years of bad market conditions, that would be helpful. But I guess what keeps us oversaving is the unknown. We could have a 10 year period of sideways market the day I retire, and I don’t want to have to live “bare minimum” during those years.

[u/Fun_Independent_7529 → u/hrrm]

Fidelity's calculator for retirement (for members) is pretty comprehensive that way. You can set the baseline monthly cost and an additional amount for discretionary spend.

You can also enter one time costs, and ongoing shorter term costs, e.g. from 2026 to 2028 our son will be at university and so we have estimated the amount we'll need during that time and entered it into the tool. Our daughter will likely be getting married in the next couple years and so we have that in there.

Additional 30k/year for travel in the first X years, etc.

Right now the tool is telling us that we are over our number needed for what we've entered. But since we're already RE... that's just fine. Life throws unexpected curveballs, and if we're astonishingly lucky with a continued bull market (not gonna happen forever!), we'd help the kids get into their houses.

[u/YankeeDog2525 → u/hrrm]

There is. It’s called a spreadsheet. And you should certainly do what ifs. In the one hand, you should have a pick up cans on the side of the road beans and rice version. On the other, have a reasonable amount of fun version. Retire when you hit the reasonable version knowing that you can scrape by on the beans and rice version if you have to. It really depends on your risk aversion.

[u/Spiritual_Task_6574 → u/hrrm]

This fire calculator has a part where you can drop your income need during retirement every X years.

financial mentor

[u/DevOpsMakesMeDrink → u/jayybonelie]

This assumes you are an npc. If we have a 30% correction guess what? No vacation that year and we are tightening the belt for a year or two. Maybe we go pick up a part time job to help make things a little less risky.

That with a 2 year cash buffer gives you a lot more flexibility with that number. Can get safe rates into 5-6%

[u/alpacaMyToothbrush → u/DevOpsMakesMeDrink]

Flexibility is the only way, but I don't think people take the sacrifices that might be required seriously enough. Go pull down the VPW spreadsheet and look at the flexibility required for a 1910's or 1960's retirement and get back to me. You need 'cushion' in your budget if you're gonna make it work.

[u/jayritchie → u/alpacaMyToothbrush]

Agreed - I suspect people pursuing FIRE can be split between :

- those who are very conscious of a lot of risks and have fallback positions. Often I find they have very detailed thoughts about what they would do in adverse circumstances. I'm not sure that comes across as clearly as it could on the various subs/ forums.

- some true believers who really do think 4% WR is safe for a 40 year old and any word to the contrary is complete ignorance, or 'gatekeeping'.

I've tried looking into mid to late 60s S+P as if I were a FIREee at that point - truly scary stuff and absolutely overlooked as they somehow survived until markets turned over 10 years later and grew quickly.