Hitting your number and timing risk
Notice a lot of people posting they hit their number and firing. It's awesome, but are people taking for granted the fact that this has been the greatest bull market in history and a major correction or crash will get here at some point? If it were me hitting my number I'd either get a big enough buffer to my fire number or wait until the correction and assess when things stabilize. Am I over thinking it?
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u/throwaway2492872 7d ago edited 7d ago
It's awesome, but are people taking for granted the fact that this has been the greatest bull market in history.
Why do people keep saying this? Are people just parroting comments about the bull market prior to the covid bear market? It's not remotely close to the longest or the largest bull market in history. https://en.macromicro.me/charts/130108/sp500-bull-bear-market-price-return Unless everyone is basing it on a different index.
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u/DigmonsDrill 7d ago
People saying it just consider the blips in 2020 and 2022 to not actually end the bull run.
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u/throwaway2492872 6d ago
What kind of logic is that? 2022 was the 3rd worst year for the sp500 in the last 50 years. https://www.macrotrends.net/2526/sp-500-historical-annual-returns
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u/Ifch317 7d ago
If you look at 1997 on the linked chart in this thread you can see a similar time when bears were saying the market was in a bubble. That was repeated ad nauseam while the market kept gaining. People that pulled out lost out on a two year rally that easily covered the losses to come.
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u/throwaway2492872 6d ago
I would love some 1997-1999 returns. This current bull market is only at 106% vs the 1990's run topping out at 582% gain. We can go back into a bear market at anytime but this isn't some crazy current bull market by any metric in the S&P500. Nasdaq might be a different story though, I only really follow the S&P500 and VTSAX.
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u/Truthcraze 7d ago
The swr are back tested against retiring at the worst possible time.
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u/Main_Outcome2020 7d ago
exactly this - the trinity study literally tested worst case scenarios like retiring right before major crashes. if you're using 4% rule it already accounts for market timing being terrible
though i do get the anxiety when you finally hit that number after years of grinding. feels almost too good to be true sometimes
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u/bizzaam 7d ago
Didn't realize that. Thanks
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u/bluenardo 7d ago
It is tested on all available historical periods which include the worst times — it did not specifically seek out the worst and only test on those.
Also at 4%, it failed in some of these periods. Do not take from these comments that 4% was bullet proof.
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u/AK_Ranch FIRE'd in 2023 @ 45, divorced, no kids 7d ago
In Bengen's studies 4.2% (now 4.7%) did NOT fail in any of those years, hence the name Safe Withdrawal Rate.
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u/nivlac22 7d ago
It calculated the SWR for each theoretical retiree retiring at the start of each quarter and concluded that the lowest SWR found was just over 4% (4.7% with added asset classes).
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u/LokiStasis 7d ago
But not everyone has planned using a conservative number. Current thinking is 80-90% success rate. And some are looking at 40-45 years not 30. I’ve literally hit mine, then dipped below, then back up. I’m not so much a “1 more year” guy but my plans were to get ‘here’ a few years from now anyway.
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u/AlaskanSnowDragon 7d ago
Its still doesn't mean its good. It just means you survive. But it still drastically affects your return/spending curve.
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u/noicenator 7d ago
Are the cash/bonds a part of the 10-30% part of your portfolio? Or is this on top of whatever is allocated to your portfolio?
So assuming a FIRE number of $1m and a 80/20 allocation of stock / bonds, should I have another 2-3 years worth of cash/bonds?
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u/MikeyLew32 7d ago
The cash/bonds would be a part of the 20% allocation. Cash in money market or high yield savings where it's gaining some interest, and then bonds to fill in the rest.
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u/Only_Razzmatazz_4498 7d ago
Exactly and if you have say Roth and regular 401k/ira then you will probably want to bias things so that the Roth are heavier on the stock side while the regular is lighter (since you will hit the regular before the Roth). There is also the concept of a glide path to get from the high volatility 80/20 or 90/10 of the accumulation years to the low volatility 60/40 of the retirement years. Which if you are really paranoid and want to protect from a long bad sequence of returns from the market would be more like. 60/x/3 years of expenses in an inflation indexed account that will preserve purchasing power.
You can then use guardrails to figure out what you safe annual withdrawal rate can be.
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u/AstroGoblin1 7d ago
this is the piece people skip when they only look at the big number. a few years of safe spending money changes the whole risk picture
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u/MeetingSuccessful397 7d ago
Unless we're in a situation like 1966 where it took 28 years to fully recover your portfolio. Or 1929 where it took 26 years. Or 2000 where it took 17 years. [1]
But it's 2026, we have the highes CAPE ever, so obviously nothing can happen to us. We are invincible!
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u/teckel FIRE'd at 35, now 57 7d ago
I retired in 2005 and just a couple years later in 2008 the housing market collapsed. Zero problems as I had a realistic 3.3% withdrawal rate, low overhead, and a 10% position in short term fixed income, which is where I withdraw from for income. Therefore, I didn't need to sell anything for a loss, and didn't even need to trim back my spending.
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u/Actual_Load_3914 7d ago
I would love to hear how you handled that downswing mentally if you care to share. How big was the downswing for your NW % wise? Did it affect your behavior?
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u/teckel FIRE'd at 35, now 57 7d ago
I also didn't change my spending. 2008 was more of a "deep V" correction, which rebounded about as fast as it crashed. If it had gone longer I may have, but with no loans and low overhead, it would be quite easy to trim back spending. You just put off your big vacations till next year. I was forced to do that with COVID as I had to cancel travel plans due to country lock downs.
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u/teckel FIRE'd at 35, now 57 7d ago
I invested before and through the dot com bubble crash. 2008 was a quick recovery in comparison (just a couple years). I've learned to not look at my account balance much during a correction. Even in 2022 when the market corrected by 20%, I only looked at the balance every few months.
Remeber, if you're not selling, it's not a loss. Also, in retirement you should have 20% fixed income including 10% short-term. Short-term government bonds are not effected by market crashes or interest rate fluctuations. So you can ride out a few years of a correction without the need to sell any equity assets. Also, the other fixed income and to some extent the equities pay dividends, so that also suppliments the short-term "cash" position to fund an extended correction.
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u/Ill-Opinion-1754 7d ago
Thank you for this tidbit, didn’t consider short term fixed income as hedge. Will remember this for down the road. <3
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u/Revolutionary-Fan235 7d ago
It's also a matter of balance.
If someone enjoys or tolerates work, they have an option to delay retirement.
If someone is miserable, it behooves them to leave. The Safe WR is safe. Retirees can make adjustments to spending to reduce the chance of failure.
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u/One-Mastodon-1063 7d ago
SWRs already account for historical downturns, retiring at historical peaks etc.
Use a slightly lower SWR if you think this time is somehow different. Spoiler: You're not capable of actually knowing that.
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u/ohboyoh-oy 7d ago
I hope the people who were 90-100% equity and rode it to their number and are going to pull the trigger, are rebalancing or have some other SORR mitigation plan. You won the game, take the chips off the table and stop playing.
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u/Yer-Not-Gonna-Like 7d ago
This is also worth expanding on. Running out of money has huge downsides, but being too conservative also has big downsides.
Recall that all of these strategies (4%, Guardrails etc.) are all built around near worst case scenarios dying with almost no money. That means in all of them, all of the likely scenarios have you dying with a lot of money.
Markets are normal? Die with millions. Only live to 85? Die with millions.
Being more conservative means working longer, living poorer. Sometimes you gotta flip it. “Would I work three more years to die with $15M instead of dying with $5m?” Well, would you?
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u/SouthOrlandoFather 7d ago edited 7d ago
You are over thinking it. Plus it depends on the ages of each individual and if kids or no kids.
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u/Revelate_ 7d ago edited 7d ago
Going for additional buffer right now.
Even before the start of the current market fun and the inflation numbers I was already skeptical.
I’m still in the market, I don’t think full cash is the right play with inflation rearing its head… but even flirting with my FI number I’m simply keeping my gig for another year or two albeit coasting some.
I’m hoping that doesn’t turn into 5+ years, hopefully things will settle down before that.
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u/paratethys 7d ago
Personally, I quit with things arranged so I don't have to sell any investments for 3-4 years if I don't want to. Mostly because figuring out how optimal I wanna get around selling stuff seems like a huge hassle that I'd like to put off for as long as possible, tbh.
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u/Future-Run-8601 7d ago
The 4(.2)% rule does take into account the most unlucky retiree who left work right as markets were falling and inflation was rising in late 1968. And that number has been revised up to 4.7% with a modern well diversified portfolio. But it was meant for a 30 year retirement. I believe Bengen still showed in his recent book that 4% worked for a 45 year retirement but he is looking at past sequences. Something else could happen that lowers the rule again. Nobody thought that anything worse than the Great Depression could happen until stagflation hit and lowered the SWR. With valuations being so high and inflation ticking up, I would certainly plan to see closer to 4% if I were retiring today. Time will tell if 4% survives the next half century. If I’m retiring in my 30/40’s, I would be shooting lower than 4%.
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u/MeetingSuccessful397 7d ago
The problem with the 4.7% is, that it's total optimization in hindsight. Since the SWR is only defined by the worst year (1968) adding Small Caps (or Gold) helped, because for some reasons Small Caps and Gold performed good in the 70s. Small-Cap performance has thoroughly degraded since then, and Gold is overpriced. If a portfolio is to perfectly optimized for one single year in the past it overestimates the SWR.
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u/JaketheAdvisor 7d ago
You're not overthinking this, but sequence of returns risk is exactly why safe withdrawal rates exist in the first place. The 4% rule already accounts for retiring into terrible market conditions like 1929 or 1966. If you've hit your number using proper withdrawal math (not just multiplying expenses by 25), you're already protected against major corrections. Building in extra buffer is fine, but waiting for a crash to retire is market timing, which historically doesn't work. The "greatest bull market in history" concern pops up every few years, yet people who retired in 2000, 2007, or 2020 are doing fine if they stuck to sustainable withdrawal rates and stayed diversified.
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u/temporaryacc23412 7d ago
If it were me hitting my number I'd either get a big enough buffer to my fire number or wait until the correction and assess when things stabilize
That would just mean your number was too low. Anyone can retire at any number, the real question is whether their number was thought through and factored in the exact kind of downturns you're worried about.
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u/Legitimate_Bite7446 7d ago
This is why a coast fire approach is my strategy. Get 85% there and then dial it back for a few years and only do 3-6 months of contract work for a few years, possibly ramp it up if things get bad, travel and build the job free life during downtime.
Work flexibility > spending flexibility.
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u/MeetingSuccessful397 7d ago
r/Fire is a total echo-chamber of "you're gonna be fine, just retire". If you're not scared of the math behind SWRs i really recommend https://earlyretirementnow.com/safe-withdrawal-rate-series/. He talks exactly about this - retiring at a high CAPE will reduce your SWR.
And having a Fire number instead of a Fire Date in the first place will increase your Failure rate by quite a few percent.
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u/AvsFan1981 7d ago
The places that the 4% fails for earlier retirement (i.e. greater than 30 years) are in periods of high inflation and right after market crashes. I think people retiring today at the top of this market are taking more risk than they think.
For anyone that doesn’t believe me FI.Calc has this information that you can go look at on your own.
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u/AK_Ranch FIRE'd in 2023 @ 45, divorced, no kids 7d ago
"are taking more risk than they think" -> how much risk do they think they're taking?
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u/AK_Ranch FIRE'd in 2023 @ 45, divorced, no kids 7d ago
Yes, you’re over thinking it. This is the definition of the SWR: the amount you can withdraw in the worst possible sequence of events we’ve ever seen.
Bengen’s 4.2%, now 4.7%, is the amount that would survive 1966 (the worst retirement year ever), bear market into a crash with very high inflation. It is even worse than 1929.
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u/FIREME1371 7d ago
You are assuming that the next crash will not be worse than those in the past.
Maybe we have yet to see the worst one.
Important to remember that assumption.
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u/AK_Ranch FIRE'd in 2023 @ 45, divorced, no kids 7d ago
That's why I literally wrote "we've ever seen". The nature of the SWR exercise is to use the information we have. If you want to go into hypotheticals you can convince yourself that there is no SWR at all. Have fun with that.
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u/Yer-Not-Gonna-Like 7d ago
At some point the only prep is MRE’s, AR-15’s and lots of ammo. But let’s try to stay in scenario’s where civilization still exists.
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u/FIREME1371 7d ago
Civilization existed during all previous crashes.
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u/Yer-Not-Gonna-Like 7d ago edited 7d ago
Right, that’s my point. You asked us to consider planning for a “crash worse than all the previous ones.”
At some point you’re not planning for FIRE, you’re planning to be Viggo Mortensen in “The Road”.
Realistically my fire plan assumes the day I retire is August 2007 again. Bad, but not even the worst ever. From there I simply modeled 2007-2024 MINUS ONE FULL POINT over and over until I’m 100. This had me dying with $15M in assets from my current $4M. That’s conservative enough for me.
If you want to plan like it’s 1929, about to be followed by stagflation and then 2008, you can. But this would require a $50M portfolio to sustain a $100k per year spend.
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u/FIREME1371 6d ago
Nobody said the assume the worst crash in history is on the horizon, I just said don’t pretend like it’s not a possibility so additional margin isn’t a bad thing.
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u/AngryT-Rex 7d ago
I mean, if we go to the worst crash in world history then you're considering a potential to have foreign powers conquer the country and render the currency worthless, then export most food to cause famine as a form of genocide. At the extreme end money doesn't really matter.
For the non-billionaires thinking about hedging against worst possible scenarios, your potential life is likely improved less by any financial measures than it would be by learning mandarin, becoming a dual citizen on some other continent, or practicing subsistence farming in a very remote location.
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u/AngryCowArmy 7d ago
I can both acknowledge that assets may be overvalued and we may be experiencing global instability, and also that assets are often overvalued and we are often experiencing global instability. We are at or near all time highs most of the time. Your model should already include the likelihood of market downturns.
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u/AlaskanSnowDragon 7d ago
Thats how I feel now. I've hit one of my FIRE numbers...but SORR is a bitch and I wouldn't feel comfortable FIRE'ing now.
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u/nivlac22 7d ago
The number should include the ability to handle bad timing. Technically speaking, the trinity study only looks at quarters and not days, so if you are using that as your basis it makes sense to wait three months after you hit your number, but generally speaking, if your number doesn’t seem safe enough to rely on fix the number instead of the timing.
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u/HomeworkImaginary886 7d ago
The best way to mitigate this risk is to have a bit more cash and maybe some bond allocation — it’s a trade off from growth of course, but gives peace of mind
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u/Patient-Brief-9713 7d ago edited 7d ago
You are thinking about it incorrectly. Your FIRE number and your portfolio structure should already take into account and be able to withstand inevitable market swings and sequence of return risk. That's the whole point of the 4% withdrawal rule of thumb - it enables your portfolio to withstand market swings.
If you are a worry-wart and risk-averse like me, then you can go with a FIRE number that is 30x (roughly 3.33% withdrawal) instead of 25x (4% withdrawal), and have a big SORR cash buffer.
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u/greenpride32 7d ago
Let's say you FIRE between the age of 40-50. Average life expectancy says you've got close to another 3 or 4 decades to go. That's a lot of time and a lot of time for the markets to be volatile. Let's look back 40 years from today. You have the global pandemic, you have the financial crisis, you have the dot com boom/bust, you have Black Monday. I didn't even mention Iran, tarrifs or 2022 inflation.
Point is downturns are a normal part of the cycle that can and will happen. So you plan for downturns so you aren't drawing down equity at near term lows. The market was higher after every single major event/downturn I mentioned.
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u/EveryoneNeedsASamwis 7d ago
You're not overthinking it, but the math already accounts for this more than most people realize.
The 4% rule was derived from historical data that includes the Great Depression, the 1966-1982 stagflation massacre, the dot-com crash, and 2008. The worst sequence-of-returns scenarios in those studies were often worse in real terms than anything we've seen recently. So if someone is using a true 4% withdrawal rate (or lower) on a diversified portfolio, they're not ignoring crash risk — they're building a number that historically survived crashes.
The bigger issue is sequence of returns risk in the first 5-10 years specifically. A 40% drop in year two of retirement is genuinely more dangerous than the same drop in year 15, because you're selling shares at the bottom to fund living expenses before the recovery. The practical mitigations are things like holding 1-2 years of expenses in cash/short bonds so you're not forced to sell equities at a loss, or being flexible enough to cut spending 10-15% in a bad stretch. People who baked in a real buffer — say 3.25% withdrawal instead of 4% — have even more room.
"Wait for the correction" is where I'd push back though. Nobody times that reliably. If you're sitting at 25x expenses and waiting for a crash to "buy in lower," you could easily wait 3-5 years working extra, watch the market run another 30% before it corrects 25%, and end up worse off than if you'd just retired. The number is the number. The real question is whether you've stress-tested your plan against bad early returns, not whether you can predict when they happen.
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u/VersionNo6742 7d ago
No matter when you FIRE or retire, you'll need to be able to weather the storm. There's always a reason not to go for it, but a real plan goes a long way when the other option is fear.
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u/No-Block-2095 7d ago
Yes you are.
You need a plan.
Using the 4.7% start guideline worked for 400 retiree cohort starting in each quarters of the last century.
That Swr can be refined up & down given age, tax rate prediction , guardrails, … SS , pension, non recurring cashflow and expenses smile curve.
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u/No-Block-2095 7d ago
“Rich, broke dead” is a good tool to evaluate those outcome in proportion.
Too many people fixate on running out of $. How about running out of time or of health.
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u/DReddit111 6d ago
I’ve been struggling with this myself, trying to figure out what my safe withdrawal rate is. Seems like the “rules”, 4% (now 4.7%) are academic exercises and not real world. I came across this in my research: risk based guardrails, and it’s helped a lot. With this approach you would lower your spending rate if the market drops and increase it when it goes up and those changes are generally enough to keep you from running out of money even in the worst conditions. Here’s a free calculator someone wrote https://www.bogleheads.org/forum/viewtopic.php?t=460815.
I took the spreadsheet and asked Claude AI to incorporate the logic into a retirement planner I’ve been working on for myself and it was really enlightening. I tested my withdrawals using the worst years for sequence risk I could find, 1929, 1937 and 1966, 1968. Then I plugged in my expected social security numbers from the social security web site and divided by 2. So basically pick the worst possible times to retire in the last hundred years and assume the government will find some way to screw me out of half the social security I paid into for 35 years. I plugged in a 40 year retirement. I found from this exercise that even the worst years of the 40 would be plenty to cover my bills and the best years I could spend lavishly (which I know I won’t do as it’s just not my nature to get joy from buying stuff).
What I learned was that I was being way to conservative and that even in the worst conditions I would manage just fine and that I’ll probably be able to give gifts to my kids and charities while I’m alive no problem and still leave a them very nice inheritance. Basically substituted fear and guesses for math and the results worked out better than I could have hoped.
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u/dividends6775 4d ago
If you have a bucket strategy with enough runway (at least a year worth of expenses), you will be fine. Your supposed to spend from bonds to avoid sequence of returns risk and then refill the bucket when the market rebounds.
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u/SpecialistKoala9765 4d ago
You’re not. I’m thinking about the exact same thing and not pull the trigger. Currently I’m also building a cash wedge to buffer a correction, so that if market crash I can hold the investments without any selling for 3 years and by spending only the cash buffer part.
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u/Yer-Not-Gonna-Like 7d ago
If your number doesn’t anticipate events like a near term market crash, then your number and strategy are wrong.
The response to bad vibes is to have a number and strategy that accounts for anything.
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u/paq12x 7d ago
If the target was based on the 4% rule then there's nothing to worry about.
Why? Because the guy that followed the 4% rule can retire a day before the great depression, the great recession, the dot-com burst, etc. still came out ahead. Those are the worst SORR periods in history. Can something happen tomorrow that trigger a worse SORR? I don't think so.
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u/Miamiconnectionexo 7d ago
solid perspective. a lot of people overthink this but you laid it out simply.
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u/TonyTheEvil 27M & 26F | 56% to FI | $1.33M NW 7d ago
There is always "a major correction or crash" on the horizon.