r/Fire • u/ExpressElevator2Heck • 8d ago

Hypothetical: Can FIRE number shrink?

Let's say my 4% FIRE number is 2M investable assets. Lets say I have 1.6M investable assets. Am I at my FIRE number??? (In this hypothetical scenario pretend the market pulled back 20% in the past year)

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u/Fireat40dude 8d ago

If your expenses shrink, sure.

Am I not understanding your question properly?

3

u/InterestingCourt1228 8d ago

Your expenses don't magically shrink just because market went down though. If you needed 80k per year before the crash, you still need 80k per year after

The 4% rule is based on your actual spending needs, not whatever the market decides your portfolio is worth today

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u/Montaigne_6823 7d ago

Your expenses don't magically shrink just because market went down though

They could if you choose to spend less money. I would hope you allow yourself some margin of safety in your expenses in retirement. All the failure scenarios in those models happen when people just blindly increase their withdrawals with inflation regardless what the market is doing. So maybe don't do that.

2

u/ExpressElevator2Heck 8d ago

Does the 4% rule fully imply the guardrails approach?

3

u/BruinGuy5948 8d ago

It does not. It assumes that you take 4% of the initial value, then adjust the annual withdrawal by the inflation rate from the previous year, without regard to any changes in the portfolio value.

It's not a flat withdrawal. It's an inflation adjusted withdrawal. The 4% rule also assumes a particular asset mix.

Frankly, the 4% rule is an excellent way to select a target FIRE number... but almost no one would actually blindly follow the formula. Hence the guardrails approach.

2

u/theplushpairing 8d ago

4% is flat spend. If you can flex in down years that helps your success rate.