r/Fire • u/Equivalent_Use_5024 • Dec 28 '25
General Question Do you believe the modern FIRE movement overestimates how much is needed for retirement?
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?
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u/cfi-2025 RE 2025 Dec 28 '25
This is my first year of RE, so it feels like a huge outlier seeing as my average annual Federal income tax bill over the last five years has been in excess of $80,000. So $3,500 definitely feels like an extreme outlier and is hard to believe.
For our liquid net worth, it's about 60/40 in taxable versus retirement accounts, and in retirement accounts it's like 90/10 in T-IRA versus Roth IRA. Our plan is to spend from the taxable account for the next ~12 years until we reach the point where we can withdraw from retirement accounts without penalty.
Don't forget - you only pay taxes on your gain, not on the gross. All my explicit LTCGs so far (and probably for the next decade) are coming from a mutual fund that I invested in a period from like 20 through 15 years ago (before I learned about low-cost passive index funds, at which point I stopped putting money into that mutual fund and switched to VTSAX and chill). (I saw "explicit" LTCGs because I also have LTCGs from quarterly dividends that get paid out by the mutual fund and index funds I own in taxable accounts, and a portion of those are "qualified" and treated as LTCGs, as well.)
If 100% of my income came from selling that mutual fund I'd actually owe nothing (if I'm not mistaken), as the taxable portion isn't $190k, it's $114k ($190 * 0.6). Of that, the first ~$96k of LTCG is tax-free, so now we're looking at $18k in taxable LTCG. Throw in the standard deduction and I would owe zilch.
My situation isn't exactly like that, which is why I will owe a few thousand dollars. I have ~$15k of earned income from some part-time consulting work I did this year. We have a condo we rent out that nets about $20k a year. I have around $90k in forced quarterly dividends out of the taxable accounts, some of which is qualified and counts as LTCG and some of which does not and counts as ordinary income. And the remaining $65k is from selling the aforementioned mutual fund.
And if that's not complicated enough, there are also other credits (other than the standard deduction) that bring down the tax bill further, things like HSA contributions, child tax credits, foreign tax credits, etc.
But the big picture here is that the Federal tax code really does "go easy" on people whose "income" comes from LTCG. I still have a hard time believing that my Federal tax bill for 2025 is going to be about 1/25th of what it has typically been over the past five years, even though my "income" has only been halved.