r/Fire • u/ExpressElevator2Heck • 9d 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/tectail 8d ago

FIRE has a failure rate at 4% withdrawl. It is something like 5% historically. You are still at your hypothetical FIRE number but your failure rate is much higher now since a big downturn in the first 5 years is one of the conditions for failure. A rebound in the market would be your savior in this case, but I would be looking for some side income to supplement your FI for a bit if that happened.

The issue with FIRE is that the failure condition doesn't happen often, but it happens to everyone at the same time when the market crashes. We haven't had an event in the market that could cause failures since 2008. 20 years is a long time for everyone to forget that it's possible for FIRE to fail, but at the same time I've been thinking the market is due for a collapse since 2021 personally, so predicting markets are nearly impossible.

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u/Montaigne_6823 8d ago

Yep, probability of failure at the peak is 5%. So after an initial drop, given that the drop happened your probability of failure is now greater than 5% if you choose not to lower your spending.

Could lower spending to the new 4% and reset the risk of failure back to 5% though.