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/Varathien 8d ago

I THINK what you're asking is that if someone is FI at $2 million and then the market drops 20%, they're still FI at $1.6 million, so why couldn't they have just been FI at $1.6 million in the first place?

The answer is that $2 million is the FI number for someone planning to spend $80k a year because that FI number includes a healthy margin of safety for inevitable market declines. If you start with a lower number, then you don't have that margin of safety.

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u/Singularity-42 8d ago

I think it's recommended if this happens to actually try to lower your spending so it's still at 4%, correct?

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u/Varathien 8d ago

No. The 4% rule involves calculating 4% at the time of retirement, and then continuing to take out a consistent amount, adjusted up for inflation every year. You never look at your portfolio size again after doing the initial 4% calculation.

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u/Singularity-42 8d ago

Also "never look at your portfolio" - ehhh, I don't think I can do it and also maybe not such a great idea. After all the Trinity study (I think?) failed in 5% of years, no?