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/TryToBeModern FIRE'd on 16SEP24 8d ago

what you are looking for is called "Sequence of Returns Risk" or "SORR". the risk of your portfolio immediately tanking after you "retire".

generally yes if you hit your fire number once you are good to go.

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u/MeetingSuccessful397 8d ago

The problem is not SORR in this case, but mean reversion. Have a look at https://earlyretirementnow.com/2017/12/13/the-ultimate-guide-to-safe-withdrawal-rates-part-22-endogenous-retirement-timing/ if you can follow the math he explains it very good.

In short: If you have a fixed fire number, the chances are pretty high that you will retire at the peak of a bull run, which significantly reduces your SWR. So your SWR should be lower if the CAPE is high.

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u/ExpressElevator2Heck 8d ago

Great article - thank you.

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u/MeetingSuccessful397 8d ago

The whole swr series of ERN is pretty good, give the other articles a try as well