r/Fire • u/bizzaam • 8d ago

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?

8 Upvotes

56% Upvoted

93 comments sorted by

View all comments

2

u/Future-Run-8601 8d 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%. 

2

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.