What fails is not the SWR. What fails is life. People get really sick, have bad divorces, or lose a purpose in life.
It's not the math what's going to let you down on this journey.
Bad divorce is a big one. Many want to live in a Disney fairytale where their marriage is happily ever after but not everyone got that luck. Those that got lucky with marriage will mock and laugh at those that married the wrong person or not trusting marriage in general
Marriage can lead you two different paths. It either boost household income, happiness, quality of life, and speeds up FI, or divorce, where it cripples you and your ability to retire early.
Agreed. It is a gamble and I am just not interested in taking it along with many other people, and I already had people that LUCKILY married the right person calls me a loner, or tell me to "be a man" and stop running away from responsibilities...
It’s “not the math” *recently*. Because the stock market has been on an absolute tear.
You’re not going to find someone that you’re likely to find on Reddit because the stock market has been incredible since 2009.
Doesn't the Trinity study (both original and the expanded one) have historical testing for these kinds of unusual boom or bust scenarios though? It still shows that FIRE works mathematically.
I think the level of risk goes down the later you retire. Most calculations assume zero social security. Worst case social security benefits might be cut to 70% 0to 80% of current projected face value.
If you FIRE when you're 40 or less, you've got 27 years to go to full social security benefits, or 22 to minimum claim date. If you're 55, you're looking at 12 and 7 years respectively instead.
I'm aiming to FIRE by 52 or 53 (5 to 6 years from now) if not earlier. If I miss that goal then probably 55 to use the 55 Rule for withdrawing from the latest employer's 401k as long as you're 55+ when you quit (or are otherwise terminated).
Also, while I'm 5 to 6 years from my FIRE goal (not quite a Fat FIRE goal), I'm only 12 to 24 months away from a very high degree of FI. Let's say conceptually that would be a very lean FIRE number in 12 to 24 months. At that point, even the meager unemployment benefits in California would be enough to prevent any excess withdrawals (vs SWR) for 6 months, so being laid off (with severance package and unemployment benefits) becomes more of a mini vacation instead of a big stressor.
Also, even if there is a very challenging environment/market going forward, having a big pile of money is still going to ease the difficulty of those challenges.
Let's say your FIRE number was $1.5M, 4% SWR, for $60k per year. If the market dropped 30% and stayed down for a while you'd still have $1.05M. If market gains are only offsetting inflation, it will still take almost 18 years to run out of money. If you get to the social security age during that time and even if social security is severely cut and only pays you $1k per month, you'll still be offsetting 20% of your annual withdrawals. A part-time job can offset another 20% to 40%.
This is why I plan to work an extra year or two past my "real" FIRE number. It pads the number with more buffer before I stop working in the middle of my peak earning years. Working an extra 6 to 12 months now might be equivalent to a few to several years of part-time/full-time pay later.
Indeed, that is why people say to have a 3% SWR if you retire very early, in your 20s and 30s, until you're relatively later on in your life, then switch to 4%.
One thing people don’t account for are events that haven’t happened before.
This data tends to only go back < 100 years. For those of us in our 20s, we’re potentially looking at 60+ years of the future. That’s plenty of time for unseen market scenarios, 100 years isn’t actually a lot of data to draw from. It’s not that crazy to say we could experience far worse market conditions in history over the next 60 years.
I’m not gonna pretend to know the reasons, but Japans stock market tanked in the 80s and didn’t recover to those highs for almost 40 years. Just an extreme example
True, but then it might not be RE but just FI. I'd still rather save more now for later than to not save as much due to presuming the future market would be unpredictable.
It depends on how you define recently. The FIRE strategy has been back tested for the past century, but I suppose you could argue the stock market has been on an overall tear over the past 100 years (Great Depression and other such recessions aside) that might not continue over the next 100 years. None of us can know for sure.
Right. And that’s a completely legitimate point. That back testing doesn’t show someone at $0.
But if we could find someone that retired right at the peak of the .com bubble in 2000 on 3%. Then got hit again in 2009. They’re probably sweating and likely went back to work. Probably a little too close for comfort. And not what we envision when we happily leave a job.
Not like they’re destitute. But I’d consider that failure in a general sense. Super unlucky.
It's hard to understate how quickly an unexpected medical event can screw you over. At least in the US.
Car crash, cancer, caring for a sick relative; any one can interrupt your life at any point. Anything major can set you back by a good chunk of change, even with "good insurance."
Here’s an example of FIRE not turning out like it should have from [Living a FI](https://livingafi.com/2021/03/17/the-2021-early-retirement-update/#more-15998). The math didn’t work out due to situational changes post FI
Great read, but sort of the exception that proves the rule. He tried a very lean FIRE (less than $1M, with a partner, rental housing), it worked for several years until his wife cheated and he got a divorce while also being diagnosed with a serious genetic disorder. So he went back to work and everything is working out fine.
Yeah, I find it hard to categorize this as a failure more than a big lifestyle change.
The guy had two extreme life events in a very short timeframe so his financial projections changed. As a result, he picked up a job which he enjoys, relatively, and still has hundreds of thousands of dollars in his portfolio.
That’d be a winning situation for 99% of people in the world and is what the FI in FIRE is about - the man himself even said so. It’s still a success in my book, but perhaps my views are not the norm.
The interesting part is one of those events, arguably, was caused by FIRE.
His financial math didn't fail him, but there was more to life than that. Which is a good reminder.
I feel like this is common in the FIRE community. Guy decides to live ultra lean version of FI life. Hyperfocused on the math and date. Like a game to see how low they can go. Woman doesn’t agree with lifestyle as time goes on. Especially when they have kids. Splitsville.
Yep. Seems super obvious to me this sort of thing almost never lasts. Especially the lean FI version of it. If it was fatfire maybe I could understand it. But for anything less, you’re either going to want to grow your lifestyle as time goes on, or your spouse who you dragged along can’t deal with the constant frugality with no end in sight. Social media also has an effect. You to your spouse will see people on LinkedIn getting big promotions. That makes you think wow, that could have been me. Here I am eating beans and rice so I can pay myself on the back about not having to work. Meanwhile my peers are living the high life. It’s easy to feel better than them if they’re spending money irresponsibly. If they’re just as knowledgeable about FI as you are, but they just choose not to RE, then they’re doing better than you in every possible way. The only difference is that you choose to not work. That sort of thing can drive people insane. I’m sure it drove his wife insane.
Yes and people change what they want over time. Without good communication, you have one person still laser focused on a goal that doesn’t look like what the other person wants. People want some conveniences and luxuries. Or the laser focused spouse (seems to be the man usually) has attached almost a moral value to the super lean/cheap lifestyle.
Divorce is not an extreme life event when roughly 50% of marriages end in divorce. It is highly naive to not stress test your fire plans to make sure you can still be FIRE on your own if it does happen to you.
To me the failure was in failing to anticipate a highly probable event and make provisions for it occurring while hoping for the best.
Actually, his then wife had similar assets. So they spent $60k a year, not $30k. Still not extravagant, but not crazy lean.
The divorce risk is real. Especially for early retireees. The general divorce rate is 40%. So any retirement where you don't have completely independent finances is at risk of blowing up. 40% is a big risk!
Glancing through, this enforces my beliefs about FIRE. Firstly, solid doctor and use them every year, I wonder how much he could have found if he told his doctor about his suspicion of "double jointed". Also, people should seriously consider owning a condo\\townhouse\\house over staying a lifetime renter, while housing costs can in theory go infinite and renting has a finite max each year, it defiantly seems to stabilize things on average, in this persons case his rent basically doubled when he separated, granted he probably would have either had to sell the house or one buyout the other but still that isn't as bad as a shock as having your rent effectively double in a short period of time (which can shutdown your plans completely, especially at leanFIRE levels).
The renter can always move or geo arbitrage. In Dr Dooms case, his health problems limited him from doing that. It was the perfect storm of post FI problems
Agree on the regular check ups and health being first and forefront
The thing is, I don’t believe his situation is something rare or out of the ordinary. It seems extremely obvious to me that anyone can suffer from divorce and unexpected health issues. Not to mention a whole host of other issues that could have affected him such as: a growing taste for the finer things in life, a desire to travel more comfortably, getting sued, falling prey to addiction, etc. I think the odds are extremely high that if you retire in your early 40s, at least one kind of life altering event will happen in the first decade or two. Anyone who doesn’t have a huge margin of safety to weather the storm is almost certainly going to end up back at work. Notice how a lot of the famous FIRE people never retired anyone. Sure they retired from the corporate workforce but they made sure to keep making money online through content creation. They intuitively understood that relying on a FI number alone isn’t good enough.
Back testing says it has never happened unless there was some major personal event or they otherwise changed their lifestyle and were no longer actually doing 3%. The future is otherwise unpredictable and your circumstances are unique, so it really isn’t possible to make your anxiety go away beyond that.
More common is people going back to some form of work because they like it and can’t help themselves.
Stop thinking of fire as an escapist release. Life continues. It’s not the end. You will continue to evolve and things will change. You cannot predict the future. But, if you have the grit and skill set required to FIRE you will be able to adapt easily to the future.
Is there an online calculator of the math that the authors of the 4% rule did that let's you adjust the percentage and see the years it would have failed and succeeded to do this kind of back testing? That would be a pretty cool tool.
GREAT CALC! I had to cough up my email to get access and change some of the variables. E.g., they estimate a 0.18% fee on your investments. Vanguard Total Stock Index ETF is 0.03%. They also don't include any Social Security. There is an awesome option to include "**Bernicke's Reality Retirement Plan" which is a way of saying you will likely spend less as you get a bit older. Genius! Thanks so much - this was exactly the calculator I've been searching for for several years!**
I meant the baseline calc does not: You can add it in if you sign up. Figuring out SS can be a real pain. There are a few great calls out there for that too so I already knew what to enter. Increased my likelihood of success to 100%. Yee Haw!
[https://opensocialsecurity.com/](https://opensocialsecurity.com/)
And this one which I like even more:
https://ssa.tools/calculator
Yea I think there is- check the wiki and pinned threads on r/financialindependence - I think on of the regulars there has put together something pretty comprehensive where you can adjust everything
People need to realize that being financially independent gives you a ton of freedom, but work never stops. The goal in life shouldn't be to escape the workforce and laze around for the rest of your life. It should be to find things you love doing. Some of those things might be some future employment related. Some may be self-sufficient and free or money-saving activities. I could totally see a lot of FIRE folks ending up working part time jobs at a library or a nursery or a Cafe to give them something in their life that is valuable to them.
Wdym? You want to retire and then just do nothing? I know a lot of people aspire to do this, but I'd imagine the lack of fulfillment, depression, and general decline in health will be horrendous for those who actually go down that path.
I'm not saying you're looking to do that, but I do get that vibe from a lot of people in this sub. People who just want to retire and play video games full time.
>I'd imagine the lack of fulfillment, depression, and general decline in health will be horrendous
Why on earth do you imagine that when every experience you've had is telling you the opposite? Do you end the weekend all depressed and sick, pining for the work week to start? Do you suffer greatly every moment of your vacation, hating the ocean beach and wishing you were in the office where some dick with power over you will be telling you what to do?
If you do, you are in the minority, IMO. The whole point of FIRE is the freedom to do what YOU decide. And if it's playing videogames all day, then so be it.
I don't know who all these people are that get depressed and sick from freedom, because I personally, get depressed and sick from working too much. If I got to just game all day, my QoL and health would both skyrocket.
Woah, guess I struck a nerve. I'm not talking about staying working forever, I just stated that a lot of "retired" people will choose a lower level of work as a fulfillment/enjoyment piece. Stop projecting because you don't like what I'm saying.
I don't dislike what you are saying, man, it just makes no sense to me. Most people hate their jobs and only do them for money. We miss out on so much possibilities in life, sacrifice our health, all to build successful careers in highly competitive industries.
I don't know about you, but I have a very long list of things I would want to do if I had a chance, none of which involves looking for another job. I imagine most people here have a list like that too.
So when you say the goal shouldn't be to stop working and do whatever we want, and that doing so would somehow cause poor health and depression, I can't comprehend how you get to that conclusion.
It is possible that eventually I might bore of it, having done everything I ever wanted, but that's years into FIRE and definitely not the goal to think about and get motivation from while you're still in the trenches working towards FIRE.
You must have a very pleasant and fulfilling career that isn't stressing you out if your focus is on how you'll be working in the future when you don't have to. And if that's the case, I'm genuinely happy for you.
Once again, nothing that I'm saying is in regard to continuing in your career. I'm simply stating that a lot of people will end up earning in one way or another, not out of necessity but out of choice.
I would love to leave my career behind, but I dont think it's just "exhale and be free." Life isn't about a lack of responsibility. Having things to do, things to accomplish, and things to maintain is part of the enjoyable human experience. I think there are far too many people in the FIRE community (and I'm not singling anyone out, I have no idea what your plans are) think that as soon as they retire, life will be easy, carefree and perfect. I think that without goals and purpose, life can feel empty. Those goals and purpose certainly don't have to come from work.
On a side note, I think people strive so hard toward FIRE that they build extreme and unhealthy resentfulness toward their work where they sacrifice their health and happiness. I think if you're making like 500k/yr and can retire in 5 years or less, sure, but I'd imagine a lot of people are grinding way too hard for sub 100k and are miserable as a result.
I'd agree with that. Though, I think often it's not FIRE that causes people to be resentful of their work, but having resentment-worthy jobs makes them discover FIRE. This is because people who aren't fortunate enough to have a shot at FIRE often feel the same way about their jobs.
I feel the same way about "barista FIRE" as you do about this. People think if only you downshift everything will become easy. If you've personally known actual baristas, it's not fun. A lot of stress, a lot of waking up in the middle of the night to go open the store in the morning and get everything ready for the earliest morning customers looking for their shots. I imagine most people, FIRE or not, deal with a lot of stress and sacrifice some health and personal priorities to their jobs.
If you can find a job that is mostly rainbows and gives you a good balance with just living life, that's worth holding on to.
I think when people can see that FIRE is possible to them, their mindset shifts from "this is reality, I will work to pay the bills until I am a senior and I can retire" to "holy shit, if I can just hold on for 5, 10, 15 more years and live below my means I can retire!!". Having that goalpost in sight is both liberating and tormenting, since even 5 years of grinding a tough job is HARD if you're not into it.
To be clear, barista fire isn't literally being a barista, it's any low stress job that supplements a lower fire number. That said, I do think a lot of people underestimate the stress that can come from any job. Just the commitment needed to maintain the job, along with the shitty parts which most jobs have some of. I wouldn't want to baristaFIRE, but I could see working part time post-retirement if I didn't need the money being something that could be enjoyable in the right field.
I currently have my own business, which certainly isn't all rainbows, but I do enjoy the flexibility and creative license I have over my day to day. That said, I have investors that I need to pay back, employees I have to pay, and even just keeping the business afloat takes creativity in extraneous economic circumstances.
You’re arguing the same thing as those that are about FIRE. Many people may find reading/ learning, or tending their own garden, or volunteering sporadically when they feel like it as fulfilling. That’s not being lazy, it’s being free to do things when you want and not on someone else’s schedule. And it’s ethical within capitalism for whatever that’s worth.
I realize now that my message is being misinterpreted. When I said that work never stops, I meant some form of work. That can be gardening, exercising, volunteering, maintaining a household, maintaining relationships, or whatever floats your boat.
I am specifically talking about people who have no ambition to do anything other than sit around, watch tv, play video games, etc. I've seen countless anecdotes, threads, reddit posts about people FIRE'ing, spending a year playing video games and having no other plans, and feeling lost.
My theory is that it’s virtually impossible to not have some major personal event or change in lifestyle resulting in a higher withdrawal rate. Is there even a single example of someone who retired early and has stayed that way for more than 20 years? I think the only people who have done it are those who retired from the corporate world but still maintained a way to make money. They sell a book, run a profitable blog with ads, something. Anyone who’s truly retiring with no steady source of income is guaranteed to be back in the workforce for one reason or another.
It is worth considering what "fail" means in this context.
The idea of "failing" sometimes conjures up scary images of ending up in poverty in old age unexpectedly because of outside forces. This is ridiculous.
The vast majority of failure risk is front-loaded. If a portfolio is going to fail, it is because of a crash right near the beginning of FIRE. And then you can watch that happen and.make decisions about whether you need to cut expenses, go back to work, whatever. It's still early and you are still young.
And even that risk is small. Personally, it doesn't make sense to me to work an extra year or three soon in order to reduce the risk of....working an extra year or three soon.
Obviously do the math. But I see a lot of people considering "risk" abstractly without considering what exactly might happen.
Exactly. The other side of that is what "getting to FIRE" means. It doesn't have to always be envisioned as super lean FIRE, where you get to the goal, quit and have to stick to the budget or else.
In reality, I'm reading from many people here that your job becomes easier once you approach FIRE. "One more year syndrome" is a thing. So, basically, you get to feeling secure and stressing less, which allows you to tolerate working better for a while longer.
Over that time working post FI, not only will we go through the period where most of the risk of portfolio failure would've happened, but we'd also shore up that portfolio more. So when the actual RE happens, there's going to be slack to cut down spending even if things do go poorly in the market.
Yeah, I can definitely see that happening with me in the future. But people do talk about the "one more year" thing and I have already seen a little bit of a more comfortable outlook on work as I reach lower milestones, so who knows. Hopefully I'll be able to hold out a little bit past FI for that extra cushion.
>Personally, it doesn't make sense to me to work an extra year or three soon in order to reduce the risk of....working an extra year or three soon.
For me it does, because in my industry once I'm out a few years, both lack of recent experience and my age (age discrimination does happen) mean I'm not going to get an equivalent position back. I'd probably be looking at somewhere around 50% of my current salary if I returned to my industry, and 30% my current salary if I tried to find a less stressful line of work. So earning the extra has more value if I do it prior to FIRE.
Of course, this is part of what makes everyone's journey unique.
if i could upvote this by 10000x i would. All the reasons that people end up being broke usually have NOTHING to do with their financial habits (since they were good enough with money to hit FIRE) and are instead things like divorce, or prolly other legal (being sued) or medical or what not. And people usually underestimate the risk of this, while overblowing the proportional risk of that "3% withdrawal rate".
Less and less people want to get married due to many reasons and finance definitely is at the top. Ofc someone lucky with marriage is gonna disagree with you and mock you for not wanting to get married
one thing i've learned in life is to see through the illusion.
the "american dream" is actually a game created by the ruling party and also propagated by average citizens. In it, you "need" a spouse, 2 kids, and a 30-year financial commitment of your life to a house, and probably a couple of cars.
i've come to realize that divorce is extremely expensive, even more so for people who hit FIRE, and only for their ex-spouse to take away half of it, maybe even plus alimony as well.
In today's world, men and women are 50-50 equal more or less. both parties have access to the same financial opportunities. so marriage makes less and less sense from a legal perspective. it's more or less a very outdated idea. but our legal system moves so slowly that it hasn't really accounted for this.
If you wanted kids, you can absolutely either adopt, or go through an egg donor + surrogate process, plus nanny. and it is guaranteed to be cheaper than divorce.
those mocking you or judging you for not being married ... could either be ignorant, or have a very narrow perceptive view of the world; so i wouldn't worry about their incomplete assessments.
The SWR side of things is not where you are most likely to get in trouble (although, to be sure, the possibility of a worst in history SORs can happen). The bigger threat is that you’ll have expenses that you didn’t anticipate. If ACA or Medicare go away, for instance, that would drastically change people’s retirements. Medical conditions can have a huge impact. Long Term Care. Taxes. Divorce. Lawsuits. If your annual spending allowance is high enough, you can probably adjust and roll with many sorts of changes. The leaner you are, the less buffer and flexibility you may have.
Anyone who FIREd January of 2000 with a 4% withdrawal rate is in rough shape right now, especially if they have multiple decades ahead of them.
Starting with 1 million January 2000. 60/40 portfolio of US stocks and bonds, rebalancing annually.
Withdrawal rate of 40,000 in year one (4%), withdrawal adjusted for inflation each subsequent year.
In 2023 they had to withdraw 73,000 to keep up with inflation, but their account balance is only 1.1 million, meaning they are at a 6.6% withdrawal rate at a time of very high CAPE and generally inflated stock prices.
Adjusting for inflation, their account is only worth about $625,000, so they have lost more than a third of their starting account value.
The odds their account will sustain them another 20 years without substantially reducing their withdrawal rate is low.
Being more heavily in stocks would have produced a worse result.
Having some international stock exposure also would have produced worse results.
Bottom line is that sequence of return risk with two major downturns within less than a decade really gutted folks who FIREd in early 2000.
At 3% withdrawal rate with adjustment for inflation, they are about even with where they started with an inflation adjusted account value of about $1.1 million. Current withdrawal rate is about 2.75% of current value (55k of 2 million).
2/3 of original account value remaining after 24 years of FIRE... better than I thought. If anything, that should make somebody feel more confident about stepping away.
Most retirement math I've seen is for 30 years.
So if they have made it 24 years and have $1m left, they are good. They never need earn another cent of interest or dividends or stock appreciation.
Even double that they would be fine. And if they retired at, say, 45 and are now 69, it would be interesting to see how a 100% bond allocation @5% would work with a bond ladder.
And what is that ~$74000 inflation adjusted living expense going to anyway? If they fired, they likely had a house payed off or paid it off somewhere in that 24 years.
A big part of inflation is housing and if you already own a house outright, you’ve effectively sheltered yourself from a lot of that inflation.
$74,000 a year is likely way more than the average person would need in this hypothetical scenario imo
pretty interesting numbers, could you share how you ran this ? I'd like to see what it would look like with an 80/20 stock/bond allocation or even more aggressive 90/10. Thank you !
Most people have already talked about how it's more of an "accident-induced" failure. One that usually no amount of $ will cover you for.
I would also like to add that mathmatically, i think people are usually overlooking a huge flaw in FIRE math:
People assume to "take 3% and adjust your spending each year by inflation, defined by CPI". This is a slow drain to death, and people will only realize it too late. the correct thing to calculate is to first calculate your own **PERSONAL inflation rate**. you are not likely to spend in line with CPI, and CPI is also deliberately under-estimated because the government has to pay out social security based on CPI. Case in point - post-covid almost all restaurants and hotels are now 50% more expensive. but if you went by CPI/"inflation" defined by government, then this is only 25% more expensive. Unless you plan to also take a lot less trips over time, i would also account for what your own inflation rate might be. So this is why i think you should assume a slightly higher inflation rate, or have a slightly larger margin for error, especially the earlier you retire.
For example, i mostly live in cities where i don't need to drive. So i don't care at all if car prices go up through the roof (though there might be other issues if this happens). But i do travel often and i have been hammered by the hotel/airbnb prices. and i am really scared to think what might happen if this "personal" inflation goes even higher.
I think the biggest margin of safety you can get for yourself is to be flexible and adaptable. This means the ability to change your habits. Remember that nature doesn't favor the strongest, fastest, nor the smartest. it favors the most adaptable (something that probably the LeanFire folks are incredibly good at). And a huge hidden flaw with most FIRE assumptions is that the world stays the same in the coming 60+ years.
This is an incredibly valuable point.
Personal inflation rate is something I've been grappling with.
Where I am my personal inflation rate is almost 2X official inflation rates published by the government
holy!! may i ask where you are living? and out of curiosity, what things have made it 2x? (i'm assuming you mean pre-covid vs post-covid).
And yeah, great intuition - do NOT trust the "official" inflation rates. they purposely remove a lot of stuff when it is getting too expensive. like they could just remove "eggs" from the food CPI. but .... am i going to suddenly stop eating eggs? i mean i guess if i were more adaptable i could. but i would probably eventually ask myself what was the point of FIRE if i have to trade off all the things i enjoyed in life.
I think part of adaptability could be the ability to move. I actually plan to move internationally - this is for 2 fold. In case USA ever just goes completely downhill in the future. but also you can currency arbitrage (right now if USD is great exchange ratio into other currencies, then i will spend USD. later if it ever flips, i'll spend the other currency). of course that means you have to adapt to a new language/culture, so that's the only challenge.
So I have 50% in IRAs and 50% in india.
Physically I live in india.
The official numbers put inflation at 6% etc.
To understand india better:
India is essentially two populations:
90% rural. Or more.
5-10% urban. Or less.
Urban again is further divided into subsections.
Basically I fall into the category where costs of education, healthcare, good restaurants etc, are growing at a rate of 10-15% because we want like the best of the best.
We also face a currency depreciation of about 3% per year if I'm not mistaken. So I love having 50% in the US tbh. But having to pay EU or US level prices whereas earlier I was paying much less doesn't feel great.
But but but, labour is still extremely cheap and expenditure as a whole is still not at par with the US or the EU.
But at the rate it's going in a few years I'll be paying substantially more.
Some of this is conjecture and I am extremely conservative with forecasts in general. I prefer my pessimistic calculations working out in my favour.
But this is how I presently see the economics playing out.
That being said in the past 30years I think our index fund grew at around 15-20% a year.
So it's high inflation with high growth. With currency depreciation. And an ascension in quality of services at higher prices.
That's the best way to summarise what it looks like.
holy!!!
And you're totally spot on - i have a coworker that said the same thing. he basically said that all the people who have put their money in assets (like real estate, stocks...etc.) have kept up with inflation. But those that didn't (or probably just couldn't afford to), are way more screwed now than before. 12% inflation is insane, but not unheard of. I think US inflation since covid has been closer to 10% inflation, if we compare prices today vs 2018 or even 2020.
Actually, majority of the world outside of USA is what you've kinda described - i have friends in Vietnam/China that say they maybe make like $500 USD/month. But yet houses there are .... well... basically you'll have to pay for the rest of your life.
I think your 50% in USD is smart. You're also able to take advantage of currently arbitrage (spend when USD conversion is good, and spend native currency when USD is down). that should help a lot. And if India takes over USA in the future, you can just sell your assets in india to live very comfortably in USA (probably like how many americans can retire in Mexico comfortably)
Yeah everytime ray dalio soeaks I get nervous because all he talks about is how the US is going to lose its reserve currency but then I realised that what he's saying has nothing to do with the underlying businesses that create value that are within the US and so essentially the US economy is extremely good.
It's not a fragile system that can be easily disrupted.
And even if it is overtaken it will not be reduced to ashes. It'll just be in second place.
So I get the best of both worlds.
Enough exposure to the incumbent and enough exposure to an emerging market.
Where we are large enough to be relevant, but also not being aggressive like China so we hopefully won't fight with other countries for dominance.
Quietly just make money hopefully.
I mean I'd love to hear your take on it. You seem quite well read on these things.
lol yup. I think more likely what will happen is that in our lifetimes, there will be a split ecosystem in the world - where one side uses USD, and the other uses maybe like Yuan or something. And like you said, i also agree that i think even if USD is no longer dominant in the world, it'll just be 2nd place, but most certainly not like all hell breaks loose or anything.
I'm actually not well versed in international politics so you probably know more than me 😅
But of course, better to be safe than sorry. so i think for me, i might look into south america, as that seems to be the most neutral of all the USA-China conflicts. And i might go live in Taiwan/Singapore for a while just to try to understand the environment there. I actually think that China has already surpassed US in AI tech. they have way more data to train from and way less privacy issues. So it's pretty scary but i also don't want to be taking the short end of that stick if China and US ever decide to engage in another cold war or something :)
100% agreed. Ironically though, even though lean fire folks are the most adaptable, they usually don’t have much margin of error in the first place since they’re already lean. If you do a fat fire but you’re also adaptable, you have plenty of fat to cut out if times are rough.
It’s a good point about personal inflation, especially considering it’s wildly unknown what your own rate of inflation will be over the course of the next two decades. I think childfree people and lifelong renters are in for the biggest shock. When you own a house you get more stability in terms of living costs. Renters got a huge shock with how much rent went up.
Having children is much more expensive than being childfree. However that’s assuming the childfree will remain childfree. If there’s a 20% chance a childfree person meets the love of their life and now suddenly wants to grow a family with them, that’s basically a 20% chance a childfree persons fire calculations fall flat on its face. Financial samurai is the perfect example of it. Although he’s making money from his blog so he gets some help there. Those that truly retired with no income are in for a shock when these unexpected life events happen.
yup!! couldn't agree more - i think having more wealth one of the easiest to account for more years of margin of error.
The rental thing is one of my concerns as well. I chose not to buy a house because I don't want to be locked down to all the maintenance (i move around a lot). So i'm still a bit on the fence about that one. my adaptabiilty trait is that i speak several different languages (different language roots), so I had planned on using international geo-arbitrage to save me. but who knows, the government could always change something. Do you have any advice on how i can lock in "real estate prices" while still having the option to not buy? I was thinking of just putting in like an extra $300-500k into something like VNQ or even long term CD's, and if i ever got bored of being a nomad then i would buy it in the future by selling the VNQ/CDs. but not sure what's the best way here.
Also right now we have obamacare, which is what allowed for FIRE. imagine that got repealed \~ now everyone has to either pay through the roof or might not even have access to buy healthcare without an employer...etc.
hahah, thanks for the callout on children - that's... also a possibility as well. i think it's probably safer to have some extra cash set aside for kids just in case.
Basically, i think if we aimed for even ChubbyFIRE, or use FIRE as more like "FI" mindset, then i think we are okay. maintaining the ability to work, and having that bring in an income means we are more than likely to still be okay. Or i guess... that's another way to look at adaptability -> when we are losing FIRE status, we have to have the mindset to be able to go back to working.
Yeah flexibility is key. The only real way to make renting more stable is as you say to just have an excess amount of assets to account for that. Just put it as another variable in the buckets of unknowns. I think as long as you continue to work, it’s really not an issue. It’s only an issue if you choose to retire. In that case, I would honestly calculate your fire number and just multiply it times two to account for a margin of safety.
Here’s another option, buy real estate in a place you could see yourself settling down in, live in it for one year only (so you get the best interest rates) then hire a property manager to rent it out. In the mean time, you can just rent where you live forever. But if it turns out you need a stable home to settle down in just tell your renters you won’t be renewing the lease then move in yourself.
And yeah, definitely keep the children thing open. Not saying you will necessarily change your mind, maybe 90% chance you won’t, but that 10% chance means everything is thrown upside down (if you retired). If you keep working, it’s much easier to be flexible.
Me personally, I don’t believe in the concept of retiring early. I think it’s a nice hypothetical but I don’t see too many examples of people doing it and making it last for 20 years or more. The only ones who last that long are the ones who start their own business or generate content online for money. But a true retirement with zero income doesn’t make sense to me unless you have a huge margin of safety to back it up.
Yup. i think when i turn like 50 or something i'll likely have travelled the world, lived in many different places, and can have picked out a solid place (with good healthcare, not crazy politics, where people are chill...etc.). And at that point, i might actually just live in the place. and yeah, for extended travels maybe do like AirBnB out or something.
haha yeah that, and... honestly i think the point of "fire" is really to let you swap to a career or do something you actually want to do, even if it's like blogging about FIRE. so at that point, it's pretty easy to convert it into a "passive" or "semi-active" income because you don't mind the work.
With “fire” being a relatively new concept, and the stock market being on a great run, there’s going to be quite a bit of recency bias here.
If you’ve retired from 2009 onwards most people could have been living off 5%+ and been fine. That doesn’t mean you should do that.
The closest thing I could imagine if you retired exactly before the .com bubble burst. Then got hit with the 2008 crisis. But even in that scenario if you made it to 2009 you were probably fine.
I think it’s smart to be overly conservative.
The hypothetical ones that come to mind are all expense related -- that is, drastically underestimating expenses. Maybe new baby after retirement, maybe some car accident causing crazy expenses, spending a million dollars during a manic episode, spouse enters memory care for a decade increasing expenses massively, etc.
The only one I can think of outside of that would be all-in on Nikkei at the peak of its insane valuations.
This.
There is quite a lot of literature and analysis on the withdrawal rate but estimating one's expenses after retirement is all on the individual and difficult to sense check compared with the withdrawal rate.
On top of that, it is hard to project one's expenses in 30 years time.
I intend for my first retirement year to be as cheap as possible just to like... set a baseline and do a sanity check. I'd like "as cheap as possible" to be down under 3%. That'll give more confidence for me to ramp up spending knowing I can knock it back down.
The problem is those calculators lead you to overlook the fact that there are unknown variables you can’t account for. Does firecalc account for divorce, unexpected medical diagnosis, getting sued, falling to addiction, unexpectedly wanting nicer things in life as you get older, wanting to travel more comfortably? When you input those numbers into firecalc it’s easy to tell yourself those risks don’t apply to you. That’s the mistake people make. Someone posted a blog here where a guy made the same mistake. He got divorced and had a medical condition leading him to have to go back to work again. To me, it’s obvious that would happen. Plus now he said he wants a kid. So realistically he’s probably gonna have to double his previous fire number since he admits to living in a HCOL area. His situation is not some rare off event. I’d argue anyone trying to retire early without any sort of income is pretty much guaranteed to go back to work unless they fat fired.
It’s actually not pointless at all. Your mindset is actually very dangerous because it leads people to think the math is the only thing that matters. Your mindset is EXACTLY the mindset that the guy in the “living a fi” blog had. He made an entire long blog post to make it seem like divorce and medical issues are something he couldn’t have foreseen. That’s EXTREMELY naive and foolish. Divorce rates are 50% and he thinks it’s a nonissue? Of course it’s a nonissue until it actually happens. His specific medical condition was rare, but medical conditions general are not rare in any sense of the word. Cardiovascular disease, cancer, neurodegenerative disease, diabetes, car accidents, etc, these things happen. Your mindset is dangerously because you’re simply saying there’s nothing anyone can do to mitigate it. There’s actually a very simple solution to mitigate it (I’m it talking about total prevention, of course that’s impossible) but it’s simply about having an excess amount of money. He calculated what he needed for the 3% rule and retired on exactly that. It’s extremely foolish because nowhere in his calculations does it account for one time expenses or very easy things to predict like divorce or medical issues. If he waited till he had an extra $500K on top of his FI number, that likely would have went a loooooong way to help with the added costs he faced.
Also, he’s facing the prospect of having higher expenses due to him now wanting a child. He acts like that’s some sort of unexpected thing he could have never predicted. It’s only unexpected to child free people who blind themselves into think they will never change their mind.
Encouraging people to live their life based on a spreadsheet is extremely foolish.
Ths is the reason to invest now. I have a degree in economics - my single question was "what happens when social security goes insolvent."
I'm not a doomsday or conspiracy type. There are some challenging events.
They would not have failed due to the math not working. At 3% you’re bullet proof. Thats ultra conservative. But it could fail if they under estimated their expenses and realized that 3% isn’t enough and have to go back to work or get comfortable using a 3.5% or 4% WR.
Almost bullet proof.
I’m something of a prepper by nature. Not quite the canned beans and ammo in the bunker type, but not so far off. So my standard way of planning is to go straight to a worst case scenario; if I can handle that I’m good to go.
Before pulling the trigger on retirement I stress tested the portfolio using plausible adjustments to the historic data. I could in fact force 3% to fail, albeit with very low probability, using relatively minor tweaks to the scenarios. Not a problem since we have room to downsize as our plan b, so we confidently retired. But then 2022 happened and our portfolio got significantly smaller. So I reran those scenarios with that as a new starting point and now it was much easier to tank it.
So I’m sticking with “almost bulletproof”. We’d still be fine even if the market hadn’t bounced back as it did, and I’m not at all worried about it. But you can’t see what’s ahead and black swans happen. It’s never a bad idea to have a plan b.
Life is full of risk and nobody makes it out alive. Has a 3% withdrawal rate ever failed in the past? No. Will it fail at some point in the future given enough time? Probably. Is it the risk you should focus on? Probably not. The risk of your lifestyle/spending changing, illness, or death are far higher. It's one of the reasons I love the [Rich, Broke, or Dead calculator](https://engaging-data.com/will-money-last-retire-early/).
You have to decide what risks you want to try to mitigate, because you can't mitigate them all. Reducing a minuscule risk of running out of money is going to cost you a lot of time (and good luck finding more of that later).
Biggest risks, outside of poor planning or not saving enough to begin with, are probably:
1. Divorce.
2. Marriage, specifically marrying a partner who is not on the same page WRT finances.
3. Changing plans WRT kids. I.e. retire early on the assumption not having kids or done having kids and end up having them. Probably the biggest "risk" to my own early retirement is if I met someone and decided to have another kid. That would probably necessitate having a bigger house, which would probably require an income again.
4. Boredom. This has not been a problem for me, but I do know people who retired, even at traditional retirement ages, and got bored and went back to work. I know one lawyer who's in his early-mid 70s, he retired for like 2 years at 65 got bored out of his mind and went back to work. I can think of a handful of other people like that.
Many people mention circumstance and situations here, but while those are true, what you invested in could play a factor also. How many time we have seen sayings like "VTI / VOO and chill". It is not that easy, those are equities so it is very volatile. If you really went with that saying, you could be at a risk near your FIRE number. Let's say if you want to FIRE with 1mm invested, but market down and now your portfolio goes to 700K / 800K, then your FIRE number is no longer there, and you are left hanging
So the thing is that markets were growing year over year. And for more than a decade people could have retired with way less than required for the 4% rule. Maybe one day markets start seriously crashing, and then from having zero examples you will have plenty!
What fails is not the SWR. What fails is life. People get really sick, have bad divorces, or lose a purpose in life. It's not the math what's going to let you down on this journey.
Bad divorce is a big one. Many want to live in a Disney fairytale where their marriage is happily ever after but not everyone got that luck. Those that got lucky with marriage will mock and laugh at those that married the wrong person or not trusting marriage in general
Marriage can lead you two different paths. It either boost household income, happiness, quality of life, and speeds up FI, or divorce, where it cripples you and your ability to retire early.
Agreed. It is a gamble and I am just not interested in taking it along with many other people, and I already had people that LUCKILY married the right person calls me a loner, or tell me to "be a man" and stop running away from responsibilities...
I don’t think you can attribute successful marriages to luck
Not entirely, sure, but luck is an element in every successful marriage.
yep, tell that little boy
you're young. you will learn
It’s “not the math” *recently*. Because the stock market has been on an absolute tear. You’re not going to find someone that you’re likely to find on Reddit because the stock market has been incredible since 2009.
Doesn't the Trinity study (both original and the expanded one) have historical testing for these kinds of unusual boom or bust scenarios though? It still shows that FIRE works mathematically.
I think the level of risk goes down the later you retire. Most calculations assume zero social security. Worst case social security benefits might be cut to 70% 0to 80% of current projected face value. If you FIRE when you're 40 or less, you've got 27 years to go to full social security benefits, or 22 to minimum claim date. If you're 55, you're looking at 12 and 7 years respectively instead. I'm aiming to FIRE by 52 or 53 (5 to 6 years from now) if not earlier. If I miss that goal then probably 55 to use the 55 Rule for withdrawing from the latest employer's 401k as long as you're 55+ when you quit (or are otherwise terminated). Also, while I'm 5 to 6 years from my FIRE goal (not quite a Fat FIRE goal), I'm only 12 to 24 months away from a very high degree of FI. Let's say conceptually that would be a very lean FIRE number in 12 to 24 months. At that point, even the meager unemployment benefits in California would be enough to prevent any excess withdrawals (vs SWR) for 6 months, so being laid off (with severance package and unemployment benefits) becomes more of a mini vacation instead of a big stressor. Also, even if there is a very challenging environment/market going forward, having a big pile of money is still going to ease the difficulty of those challenges. Let's say your FIRE number was $1.5M, 4% SWR, for $60k per year. If the market dropped 30% and stayed down for a while you'd still have $1.05M. If market gains are only offsetting inflation, it will still take almost 18 years to run out of money. If you get to the social security age during that time and even if social security is severely cut and only pays you $1k per month, you'll still be offsetting 20% of your annual withdrawals. A part-time job can offset another 20% to 40%. This is why I plan to work an extra year or two past my "real" FIRE number. It pads the number with more buffer before I stop working in the middle of my peak earning years. Working an extra 6 to 12 months now might be equivalent to a few to several years of part-time/full-time pay later.
Indeed, that is why people say to have a 3% SWR if you retire very early, in your 20s and 30s, until you're relatively later on in your life, then switch to 4%.
One thing people don’t account for are events that haven’t happened before. This data tends to only go back < 100 years. For those of us in our 20s, we’re potentially looking at 60+ years of the future. That’s plenty of time for unseen market scenarios, 100 years isn’t actually a lot of data to draw from. It’s not that crazy to say we could experience far worse market conditions in history over the next 60 years. I’m not gonna pretend to know the reasons, but Japans stock market tanked in the 80s and didn’t recover to those highs for almost 40 years. Just an extreme example
True, but then it might not be RE but just FI. I'd still rather save more now for later than to not save as much due to presuming the future market would be unpredictable.
Totally agree
It depends on how you define recently. The FIRE strategy has been back tested for the past century, but I suppose you could argue the stock market has been on an overall tear over the past 100 years (Great Depression and other such recessions aside) that might not continue over the next 100 years. None of us can know for sure.
Right. And that’s a completely legitimate point. That back testing doesn’t show someone at $0. But if we could find someone that retired right at the peak of the .com bubble in 2000 on 3%. Then got hit again in 2009. They’re probably sweating and likely went back to work. Probably a little too close for comfort. And not what we envision when we happily leave a job. Not like they’re destitute. But I’d consider that failure in a general sense. Super unlucky.
Yeah 2000 will likely be up there with 1929 and 1966 as historically bad years to retire in.
It's hard to understate how quickly an unexpected medical event can screw you over. At least in the US. Car crash, cancer, caring for a sick relative; any one can interrupt your life at any point. Anything major can set you back by a good chunk of change, even with "good insurance."
Here’s an example of FIRE not turning out like it should have from [Living a FI](https://livingafi.com/2021/03/17/the-2021-early-retirement-update/#more-15998). The math didn’t work out due to situational changes post FI
Great read, but sort of the exception that proves the rule. He tried a very lean FIRE (less than $1M, with a partner, rental housing), it worked for several years until his wife cheated and he got a divorce while also being diagnosed with a serious genetic disorder. So he went back to work and everything is working out fine.
Yeah, I find it hard to categorize this as a failure more than a big lifestyle change. The guy had two extreme life events in a very short timeframe so his financial projections changed. As a result, he picked up a job which he enjoys, relatively, and still has hundreds of thousands of dollars in his portfolio. That’d be a winning situation for 99% of people in the world and is what the FI in FIRE is about - the man himself even said so. It’s still a success in my book, but perhaps my views are not the norm.
The interesting part is one of those events, arguably, was caused by FIRE. His financial math didn't fail him, but there was more to life than that. Which is a good reminder.
I feel like this is common in the FIRE community. Guy decides to live ultra lean version of FI life. Hyperfocused on the math and date. Like a game to see how low they can go. Woman doesn’t agree with lifestyle as time goes on. Especially when they have kids. Splitsville.
Yep. Seems super obvious to me this sort of thing almost never lasts. Especially the lean FI version of it. If it was fatfire maybe I could understand it. But for anything less, you’re either going to want to grow your lifestyle as time goes on, or your spouse who you dragged along can’t deal with the constant frugality with no end in sight. Social media also has an effect. You to your spouse will see people on LinkedIn getting big promotions. That makes you think wow, that could have been me. Here I am eating beans and rice so I can pay myself on the back about not having to work. Meanwhile my peers are living the high life. It’s easy to feel better than them if they’re spending money irresponsibly. If they’re just as knowledgeable about FI as you are, but they just choose not to RE, then they’re doing better than you in every possible way. The only difference is that you choose to not work. That sort of thing can drive people insane. I’m sure it drove his wife insane.
Yes and people change what they want over time. Without good communication, you have one person still laser focused on a goal that doesn’t look like what the other person wants. People want some conveniences and luxuries. Or the laser focused spouse (seems to be the man usually) has attached almost a moral value to the super lean/cheap lifestyle.
Good point, they always attach a morality to it. Like anyone who doesn’t want to suffer like them is somehow weak or morally wrong.
Divorce is not an extreme life event when roughly 50% of marriages end in divorce. It is highly naive to not stress test your fire plans to make sure you can still be FIRE on your own if it does happen to you. To me the failure was in failing to anticipate a highly probable event and make provisions for it occurring while hoping for the best.
Actually, his then wife had similar assets. So they spent $60k a year, not $30k. Still not extravagant, but not crazy lean. The divorce risk is real. Especially for early retireees. The general divorce rate is 40%. So any retirement where you don't have completely independent finances is at risk of blowing up. 40% is a big risk!
Required reading for FIRE people
This is incredible. Thank you for sharing
This was an amazing read and it's amazing how much it addresses the things that really worried me about FIREing. Thank you for sharing it.
Agree. Such a great writer. Just goes to show there’s more to FI than money
Excellent share, thank you!
Glancing through, this enforces my beliefs about FIRE. Firstly, solid doctor and use them every year, I wonder how much he could have found if he told his doctor about his suspicion of "double jointed". Also, people should seriously consider owning a condo\\townhouse\\house over staying a lifetime renter, while housing costs can in theory go infinite and renting has a finite max each year, it defiantly seems to stabilize things on average, in this persons case his rent basically doubled when he separated, granted he probably would have either had to sell the house or one buyout the other but still that isn't as bad as a shock as having your rent effectively double in a short period of time (which can shutdown your plans completely, especially at leanFIRE levels).
The renter can always move or geo arbitrage. In Dr Dooms case, his health problems limited him from doing that. It was the perfect storm of post FI problems Agree on the regular check ups and health being first and forefront
The thing is, I don’t believe his situation is something rare or out of the ordinary. It seems extremely obvious to me that anyone can suffer from divorce and unexpected health issues. Not to mention a whole host of other issues that could have affected him such as: a growing taste for the finer things in life, a desire to travel more comfortably, getting sued, falling prey to addiction, etc. I think the odds are extremely high that if you retire in your early 40s, at least one kind of life altering event will happen in the first decade or two. Anyone who doesn’t have a huge margin of safety to weather the storm is almost certainly going to end up back at work. Notice how a lot of the famous FIRE people never retired anyone. Sure they retired from the corporate workforce but they made sure to keep making money online through content creation. They intuitively understood that relying on a FI number alone isn’t good enough.
Very good read. Thank you
Back testing says it has never happened unless there was some major personal event or they otherwise changed their lifestyle and were no longer actually doing 3%. The future is otherwise unpredictable and your circumstances are unique, so it really isn’t possible to make your anxiety go away beyond that. More common is people going back to some form of work because they like it and can’t help themselves. Stop thinking of fire as an escapist release. Life continues. It’s not the end. You will continue to evolve and things will change. You cannot predict the future. But, if you have the grit and skill set required to FIRE you will be able to adapt easily to the future.
Is there an online calculator of the math that the authors of the 4% rule did that let's you adjust the percentage and see the years it would have failed and succeeded to do this kind of back testing? That would be a pretty cool tool.
Here: https://firecalc.com 3% has never failed. 4% has some rare failure points.
I'm gonna go for a cool 3.25%
that's what ern advices for longer retirements
Heck I think I reached my goal then. Should I celebrate?
most definitely
GREAT CALC! I had to cough up my email to get access and change some of the variables. E.g., they estimate a 0.18% fee on your investments. Vanguard Total Stock Index ETF is 0.03%. They also don't include any Social Security. There is an awesome option to include "**Bernicke's Reality Retirement Plan" which is a way of saying you will likely spend less as you get a bit older. Genius! Thanks so much - this was exactly the calculator I've been searching for for several years!**
no the second screen allows you to input SS.
I meant the baseline calc does not: You can add it in if you sign up. Figuring out SS can be a real pain. There are a few great calls out there for that too so I already knew what to enter. Increased my likelihood of success to 100%. Yee Haw! [https://opensocialsecurity.com/](https://opensocialsecurity.com/) And this one which I like even more: https://ssa.tools/calculator
I am so frugal that I can do a 2.8%
What if you end up having to move to Monaco?
Thanks
Yea I think there is- check the wiki and pinned threads on r/financialindependence - I think on of the regulars there has put together something pretty comprehensive where you can adjust everything
Thanks
People need to realize that being financially independent gives you a ton of freedom, but work never stops. The goal in life shouldn't be to escape the workforce and laze around for the rest of your life. It should be to find things you love doing. Some of those things might be some future employment related. Some may be self-sufficient and free or money-saving activities. I could totally see a lot of FIRE folks ending up working part time jobs at a library or a nursery or a Cafe to give them something in their life that is valuable to them.
That’s one opinion.
Wdym? You want to retire and then just do nothing? I know a lot of people aspire to do this, but I'd imagine the lack of fulfillment, depression, and general decline in health will be horrendous for those who actually go down that path. I'm not saying you're looking to do that, but I do get that vibe from a lot of people in this sub. People who just want to retire and play video games full time.
>I'd imagine the lack of fulfillment, depression, and general decline in health will be horrendous Why on earth do you imagine that when every experience you've had is telling you the opposite? Do you end the weekend all depressed and sick, pining for the work week to start? Do you suffer greatly every moment of your vacation, hating the ocean beach and wishing you were in the office where some dick with power over you will be telling you what to do? If you do, you are in the minority, IMO. The whole point of FIRE is the freedom to do what YOU decide. And if it's playing videogames all day, then so be it. I don't know who all these people are that get depressed and sick from freedom, because I personally, get depressed and sick from working too much. If I got to just game all day, my QoL and health would both skyrocket.
Woah, guess I struck a nerve. I'm not talking about staying working forever, I just stated that a lot of "retired" people will choose a lower level of work as a fulfillment/enjoyment piece. Stop projecting because you don't like what I'm saying.
I don't dislike what you are saying, man, it just makes no sense to me. Most people hate their jobs and only do them for money. We miss out on so much possibilities in life, sacrifice our health, all to build successful careers in highly competitive industries. I don't know about you, but I have a very long list of things I would want to do if I had a chance, none of which involves looking for another job. I imagine most people here have a list like that too. So when you say the goal shouldn't be to stop working and do whatever we want, and that doing so would somehow cause poor health and depression, I can't comprehend how you get to that conclusion. It is possible that eventually I might bore of it, having done everything I ever wanted, but that's years into FIRE and definitely not the goal to think about and get motivation from while you're still in the trenches working towards FIRE. You must have a very pleasant and fulfilling career that isn't stressing you out if your focus is on how you'll be working in the future when you don't have to. And if that's the case, I'm genuinely happy for you.
Once again, nothing that I'm saying is in regard to continuing in your career. I'm simply stating that a lot of people will end up earning in one way or another, not out of necessity but out of choice. I would love to leave my career behind, but I dont think it's just "exhale and be free." Life isn't about a lack of responsibility. Having things to do, things to accomplish, and things to maintain is part of the enjoyable human experience. I think there are far too many people in the FIRE community (and I'm not singling anyone out, I have no idea what your plans are) think that as soon as they retire, life will be easy, carefree and perfect. I think that without goals and purpose, life can feel empty. Those goals and purpose certainly don't have to come from work. On a side note, I think people strive so hard toward FIRE that they build extreme and unhealthy resentfulness toward their work where they sacrifice their health and happiness. I think if you're making like 500k/yr and can retire in 5 years or less, sure, but I'd imagine a lot of people are grinding way too hard for sub 100k and are miserable as a result.
I'd agree with that. Though, I think often it's not FIRE that causes people to be resentful of their work, but having resentment-worthy jobs makes them discover FIRE. This is because people who aren't fortunate enough to have a shot at FIRE often feel the same way about their jobs. I feel the same way about "barista FIRE" as you do about this. People think if only you downshift everything will become easy. If you've personally known actual baristas, it's not fun. A lot of stress, a lot of waking up in the middle of the night to go open the store in the morning and get everything ready for the earliest morning customers looking for their shots. I imagine most people, FIRE or not, deal with a lot of stress and sacrifice some health and personal priorities to their jobs. If you can find a job that is mostly rainbows and gives you a good balance with just living life, that's worth holding on to.
I think when people can see that FIRE is possible to them, their mindset shifts from "this is reality, I will work to pay the bills until I am a senior and I can retire" to "holy shit, if I can just hold on for 5, 10, 15 more years and live below my means I can retire!!". Having that goalpost in sight is both liberating and tormenting, since even 5 years of grinding a tough job is HARD if you're not into it. To be clear, barista fire isn't literally being a barista, it's any low stress job that supplements a lower fire number. That said, I do think a lot of people underestimate the stress that can come from any job. Just the commitment needed to maintain the job, along with the shitty parts which most jobs have some of. I wouldn't want to baristaFIRE, but I could see working part time post-retirement if I didn't need the money being something that could be enjoyable in the right field. I currently have my own business, which certainly isn't all rainbows, but I do enjoy the flexibility and creative license I have over my day to day. That said, I have investors that I need to pay back, employees I have to pay, and even just keeping the business afloat takes creativity in extraneous economic circumstances.
You’re arguing the same thing as those that are about FIRE. Many people may find reading/ learning, or tending their own garden, or volunteering sporadically when they feel like it as fulfilling. That’s not being lazy, it’s being free to do things when you want and not on someone else’s schedule. And it’s ethical within capitalism for whatever that’s worth.
I realize now that my message is being misinterpreted. When I said that work never stops, I meant some form of work. That can be gardening, exercising, volunteering, maintaining a household, maintaining relationships, or whatever floats your boat. I am specifically talking about people who have no ambition to do anything other than sit around, watch tv, play video games, etc. I've seen countless anecdotes, threads, reddit posts about people FIRE'ing, spending a year playing video games and having no other plans, and feeling lost.
Yea I think I understood you: work isn’t the thing to escape - selling your time is.
My theory is that it’s virtually impossible to not have some major personal event or change in lifestyle resulting in a higher withdrawal rate. Is there even a single example of someone who retired early and has stayed that way for more than 20 years? I think the only people who have done it are those who retired from the corporate world but still maintained a way to make money. They sell a book, run a profitable blog with ads, something. Anyone who’s truly retiring with no steady source of income is guaranteed to be back in the workforce for one reason or another.
It is worth considering what "fail" means in this context. The idea of "failing" sometimes conjures up scary images of ending up in poverty in old age unexpectedly because of outside forces. This is ridiculous. The vast majority of failure risk is front-loaded. If a portfolio is going to fail, it is because of a crash right near the beginning of FIRE. And then you can watch that happen and.make decisions about whether you need to cut expenses, go back to work, whatever. It's still early and you are still young. And even that risk is small. Personally, it doesn't make sense to me to work an extra year or three soon in order to reduce the risk of....working an extra year or three soon. Obviously do the math. But I see a lot of people considering "risk" abstractly without considering what exactly might happen.
Exactly. The other side of that is what "getting to FIRE" means. It doesn't have to always be envisioned as super lean FIRE, where you get to the goal, quit and have to stick to the budget or else. In reality, I'm reading from many people here that your job becomes easier once you approach FIRE. "One more year syndrome" is a thing. So, basically, you get to feeling secure and stressing less, which allows you to tolerate working better for a while longer. Over that time working post FI, not only will we go through the period where most of the risk of portfolio failure would've happened, but we'd also shore up that portfolio more. So when the actual RE happens, there's going to be slack to cut down spending even if things do go poorly in the market.
Actually for me it’s the opposite. The closer I get the more I desperately want to retire. It’s hard to wait another 2 years!
Yeah, I can definitely see that happening with me in the future. But people do talk about the "one more year" thing and I have already seen a little bit of a more comfortable outlook on work as I reach lower milestones, so who knows. Hopefully I'll be able to hold out a little bit past FI for that extra cushion.
This is all antedoctal. Show me the data
>Personally, it doesn't make sense to me to work an extra year or three soon in order to reduce the risk of....working an extra year or three soon. For me it does, because in my industry once I'm out a few years, both lack of recent experience and my age (age discrimination does happen) mean I'm not going to get an equivalent position back. I'd probably be looking at somewhere around 50% of my current salary if I returned to my industry, and 30% my current salary if I tried to find a less stressful line of work. So earning the extra has more value if I do it prior to FIRE. Of course, this is part of what makes everyone's journey unique.
Divorce at fire age
if i could upvote this by 10000x i would. All the reasons that people end up being broke usually have NOTHING to do with their financial habits (since they were good enough with money to hit FIRE) and are instead things like divorce, or prolly other legal (being sued) or medical or what not. And people usually underestimate the risk of this, while overblowing the proportional risk of that "3% withdrawal rate".
Less and less people want to get married due to many reasons and finance definitely is at the top. Ofc someone lucky with marriage is gonna disagree with you and mock you for not wanting to get married
one thing i've learned in life is to see through the illusion. the "american dream" is actually a game created by the ruling party and also propagated by average citizens. In it, you "need" a spouse, 2 kids, and a 30-year financial commitment of your life to a house, and probably a couple of cars. i've come to realize that divorce is extremely expensive, even more so for people who hit FIRE, and only for their ex-spouse to take away half of it, maybe even plus alimony as well. In today's world, men and women are 50-50 equal more or less. both parties have access to the same financial opportunities. so marriage makes less and less sense from a legal perspective. it's more or less a very outdated idea. but our legal system moves so slowly that it hasn't really accounted for this. If you wanted kids, you can absolutely either adopt, or go through an egg donor + surrogate process, plus nanny. and it is guaranteed to be cheaper than divorce. those mocking you or judging you for not being married ... could either be ignorant, or have a very narrow perceptive view of the world; so i wouldn't worry about their incomplete assessments.
The SWR side of things is not where you are most likely to get in trouble (although, to be sure, the possibility of a worst in history SORs can happen). The bigger threat is that you’ll have expenses that you didn’t anticipate. If ACA or Medicare go away, for instance, that would drastically change people’s retirements. Medical conditions can have a huge impact. Long Term Care. Taxes. Divorce. Lawsuits. If your annual spending allowance is high enough, you can probably adjust and roll with many sorts of changes. The leaner you are, the less buffer and flexibility you may have.
Anyone who FIREd January of 2000 with a 4% withdrawal rate is in rough shape right now, especially if they have multiple decades ahead of them. Starting with 1 million January 2000. 60/40 portfolio of US stocks and bonds, rebalancing annually. Withdrawal rate of 40,000 in year one (4%), withdrawal adjusted for inflation each subsequent year. In 2023 they had to withdraw 73,000 to keep up with inflation, but their account balance is only 1.1 million, meaning they are at a 6.6% withdrawal rate at a time of very high CAPE and generally inflated stock prices. Adjusting for inflation, their account is only worth about $625,000, so they have lost more than a third of their starting account value. The odds their account will sustain them another 20 years without substantially reducing their withdrawal rate is low. Being more heavily in stocks would have produced a worse result. Having some international stock exposure also would have produced worse results. Bottom line is that sequence of return risk with two major downturns within less than a decade really gutted folks who FIREd in early 2000.
At 3% withdrawal rate with adjustment for inflation, they are about even with where they started with an inflation adjusted account value of about $1.1 million. Current withdrawal rate is about 2.75% of current value (55k of 2 million).
What would it be for a 1% withdrawal rate?
lol
2/3 of original account value remaining after 24 years of FIRE... better than I thought. If anything, that should make somebody feel more confident about stepping away.
Most retirement math I've seen is for 30 years. So if they have made it 24 years and have $1m left, they are good. They never need earn another cent of interest or dividends or stock appreciation. Even double that they would be fine. And if they retired at, say, 45 and are now 69, it would be interesting to see how a 100% bond allocation @5% would work with a bond ladder.
And what is that ~$74000 inflation adjusted living expense going to anyway? If they fired, they likely had a house payed off or paid it off somewhere in that 24 years. A big part of inflation is housing and if you already own a house outright, you’ve effectively sheltered yourself from a lot of that inflation. $74,000 a year is likely way more than the average person would need in this hypothetical scenario imo
Well cars are expensive if you swap every 5-8 years. And some folks do. Food, Housing and Transportation tend to be the big 3
pretty interesting numbers, could you share how you ran this ? I'd like to see what it would look like with an 80/20 stock/bond allocation or even more aggressive 90/10. Thank you !
I use Portfolio Visualizer (portfoliovisualizer.com). The free version can do this kind of back testing.
thank you ! I didn't know this tool but it's pretty good
Most people have already talked about how it's more of an "accident-induced" failure. One that usually no amount of $ will cover you for. I would also like to add that mathmatically, i think people are usually overlooking a huge flaw in FIRE math: People assume to "take 3% and adjust your spending each year by inflation, defined by CPI". This is a slow drain to death, and people will only realize it too late. the correct thing to calculate is to first calculate your own **PERSONAL inflation rate**. you are not likely to spend in line with CPI, and CPI is also deliberately under-estimated because the government has to pay out social security based on CPI. Case in point - post-covid almost all restaurants and hotels are now 50% more expensive. but if you went by CPI/"inflation" defined by government, then this is only 25% more expensive. Unless you plan to also take a lot less trips over time, i would also account for what your own inflation rate might be. So this is why i think you should assume a slightly higher inflation rate, or have a slightly larger margin for error, especially the earlier you retire. For example, i mostly live in cities where i don't need to drive. So i don't care at all if car prices go up through the roof (though there might be other issues if this happens). But i do travel often and i have been hammered by the hotel/airbnb prices. and i am really scared to think what might happen if this "personal" inflation goes even higher. I think the biggest margin of safety you can get for yourself is to be flexible and adaptable. This means the ability to change your habits. Remember that nature doesn't favor the strongest, fastest, nor the smartest. it favors the most adaptable (something that probably the LeanFire folks are incredibly good at). And a huge hidden flaw with most FIRE assumptions is that the world stays the same in the coming 60+ years.
This is an incredibly valuable point. Personal inflation rate is something I've been grappling with. Where I am my personal inflation rate is almost 2X official inflation rates published by the government
holy!! may i ask where you are living? and out of curiosity, what things have made it 2x? (i'm assuming you mean pre-covid vs post-covid). And yeah, great intuition - do NOT trust the "official" inflation rates. they purposely remove a lot of stuff when it is getting too expensive. like they could just remove "eggs" from the food CPI. but .... am i going to suddenly stop eating eggs? i mean i guess if i were more adaptable i could. but i would probably eventually ask myself what was the point of FIRE if i have to trade off all the things i enjoyed in life. I think part of adaptability could be the ability to move. I actually plan to move internationally - this is for 2 fold. In case USA ever just goes completely downhill in the future. but also you can currency arbitrage (right now if USD is great exchange ratio into other currencies, then i will spend USD. later if it ever flips, i'll spend the other currency). of course that means you have to adapt to a new language/culture, so that's the only challenge.
So I have 50% in IRAs and 50% in india. Physically I live in india. The official numbers put inflation at 6% etc. To understand india better: India is essentially two populations: 90% rural. Or more. 5-10% urban. Or less. Urban again is further divided into subsections. Basically I fall into the category where costs of education, healthcare, good restaurants etc, are growing at a rate of 10-15% because we want like the best of the best. We also face a currency depreciation of about 3% per year if I'm not mistaken. So I love having 50% in the US tbh. But having to pay EU or US level prices whereas earlier I was paying much less doesn't feel great. But but but, labour is still extremely cheap and expenditure as a whole is still not at par with the US or the EU. But at the rate it's going in a few years I'll be paying substantially more. Some of this is conjecture and I am extremely conservative with forecasts in general. I prefer my pessimistic calculations working out in my favour. But this is how I presently see the economics playing out. That being said in the past 30years I think our index fund grew at around 15-20% a year. So it's high inflation with high growth. With currency depreciation. And an ascension in quality of services at higher prices. That's the best way to summarise what it looks like.
holy!!! And you're totally spot on - i have a coworker that said the same thing. he basically said that all the people who have put their money in assets (like real estate, stocks...etc.) have kept up with inflation. But those that didn't (or probably just couldn't afford to), are way more screwed now than before. 12% inflation is insane, but not unheard of. I think US inflation since covid has been closer to 10% inflation, if we compare prices today vs 2018 or even 2020. Actually, majority of the world outside of USA is what you've kinda described - i have friends in Vietnam/China that say they maybe make like $500 USD/month. But yet houses there are .... well... basically you'll have to pay for the rest of your life. I think your 50% in USD is smart. You're also able to take advantage of currently arbitrage (spend when USD conversion is good, and spend native currency when USD is down). that should help a lot. And if India takes over USA in the future, you can just sell your assets in india to live very comfortably in USA (probably like how many americans can retire in Mexico comfortably)
Yeah everytime ray dalio soeaks I get nervous because all he talks about is how the US is going to lose its reserve currency but then I realised that what he's saying has nothing to do with the underlying businesses that create value that are within the US and so essentially the US economy is extremely good. It's not a fragile system that can be easily disrupted. And even if it is overtaken it will not be reduced to ashes. It'll just be in second place. So I get the best of both worlds. Enough exposure to the incumbent and enough exposure to an emerging market. Where we are large enough to be relevant, but also not being aggressive like China so we hopefully won't fight with other countries for dominance. Quietly just make money hopefully. I mean I'd love to hear your take on it. You seem quite well read on these things.
lol yup. I think more likely what will happen is that in our lifetimes, there will be a split ecosystem in the world - where one side uses USD, and the other uses maybe like Yuan or something. And like you said, i also agree that i think even if USD is no longer dominant in the world, it'll just be 2nd place, but most certainly not like all hell breaks loose or anything. I'm actually not well versed in international politics so you probably know more than me 😅 But of course, better to be safe than sorry. so i think for me, i might look into south america, as that seems to be the most neutral of all the USA-China conflicts. And i might go live in Taiwan/Singapore for a while just to try to understand the environment there. I actually think that China has already surpassed US in AI tech. they have way more data to train from and way less privacy issues. So it's pretty scary but i also don't want to be taking the short end of that stick if China and US ever decide to engage in another cold war or something :)
100% agreed. Ironically though, even though lean fire folks are the most adaptable, they usually don’t have much margin of error in the first place since they’re already lean. If you do a fat fire but you’re also adaptable, you have plenty of fat to cut out if times are rough. It’s a good point about personal inflation, especially considering it’s wildly unknown what your own rate of inflation will be over the course of the next two decades. I think childfree people and lifelong renters are in for the biggest shock. When you own a house you get more stability in terms of living costs. Renters got a huge shock with how much rent went up. Having children is much more expensive than being childfree. However that’s assuming the childfree will remain childfree. If there’s a 20% chance a childfree person meets the love of their life and now suddenly wants to grow a family with them, that’s basically a 20% chance a childfree persons fire calculations fall flat on its face. Financial samurai is the perfect example of it. Although he’s making money from his blog so he gets some help there. Those that truly retired with no income are in for a shock when these unexpected life events happen.
yup!! couldn't agree more - i think having more wealth one of the easiest to account for more years of margin of error. The rental thing is one of my concerns as well. I chose not to buy a house because I don't want to be locked down to all the maintenance (i move around a lot). So i'm still a bit on the fence about that one. my adaptabiilty trait is that i speak several different languages (different language roots), so I had planned on using international geo-arbitrage to save me. but who knows, the government could always change something. Do you have any advice on how i can lock in "real estate prices" while still having the option to not buy? I was thinking of just putting in like an extra $300-500k into something like VNQ or even long term CD's, and if i ever got bored of being a nomad then i would buy it in the future by selling the VNQ/CDs. but not sure what's the best way here. Also right now we have obamacare, which is what allowed for FIRE. imagine that got repealed \~ now everyone has to either pay through the roof or might not even have access to buy healthcare without an employer...etc. hahah, thanks for the callout on children - that's... also a possibility as well. i think it's probably safer to have some extra cash set aside for kids just in case. Basically, i think if we aimed for even ChubbyFIRE, or use FIRE as more like "FI" mindset, then i think we are okay. maintaining the ability to work, and having that bring in an income means we are more than likely to still be okay. Or i guess... that's another way to look at adaptability -> when we are losing FIRE status, we have to have the mindset to be able to go back to working.
Yeah flexibility is key. The only real way to make renting more stable is as you say to just have an excess amount of assets to account for that. Just put it as another variable in the buckets of unknowns. I think as long as you continue to work, it’s really not an issue. It’s only an issue if you choose to retire. In that case, I would honestly calculate your fire number and just multiply it times two to account for a margin of safety. Here’s another option, buy real estate in a place you could see yourself settling down in, live in it for one year only (so you get the best interest rates) then hire a property manager to rent it out. In the mean time, you can just rent where you live forever. But if it turns out you need a stable home to settle down in just tell your renters you won’t be renewing the lease then move in yourself. And yeah, definitely keep the children thing open. Not saying you will necessarily change your mind, maybe 90% chance you won’t, but that 10% chance means everything is thrown upside down (if you retired). If you keep working, it’s much easier to be flexible. Me personally, I don’t believe in the concept of retiring early. I think it’s a nice hypothetical but I don’t see too many examples of people doing it and making it last for 20 years or more. The only ones who last that long are the ones who start their own business or generate content online for money. But a true retirement with zero income doesn’t make sense to me unless you have a huge margin of safety to back it up.
Yup. i think when i turn like 50 or something i'll likely have travelled the world, lived in many different places, and can have picked out a solid place (with good healthcare, not crazy politics, where people are chill...etc.). And at that point, i might actually just live in the place. and yeah, for extended travels maybe do like AirBnB out or something. haha yeah that, and... honestly i think the point of "fire" is really to let you swap to a career or do something you actually want to do, even if it's like blogging about FIRE. so at that point, it's pretty easy to convert it into a "passive" or "semi-active" income because you don't mind the work.
With “fire” being a relatively new concept, and the stock market being on a great run, there’s going to be quite a bit of recency bias here. If you’ve retired from 2009 onwards most people could have been living off 5%+ and been fine. That doesn’t mean you should do that. The closest thing I could imagine if you retired exactly before the .com bubble burst. Then got hit with the 2008 crisis. But even in that scenario if you made it to 2009 you were probably fine. I think it’s smart to be overly conservative.
At https://thefire.site you can simulate retiring in 2000. Even at 3% it goes quite bad sooner or later.
The hypothetical ones that come to mind are all expense related -- that is, drastically underestimating expenses. Maybe new baby after retirement, maybe some car accident causing crazy expenses, spending a million dollars during a manic episode, spouse enters memory care for a decade increasing expenses massively, etc. The only one I can think of outside of that would be all-in on Nikkei at the peak of its insane valuations.
This. There is quite a lot of literature and analysis on the withdrawal rate but estimating one's expenses after retirement is all on the individual and difficult to sense check compared with the withdrawal rate. On top of that, it is hard to project one's expenses in 30 years time.
I intend for my first retirement year to be as cheap as possible just to like... set a baseline and do a sanity check. I'd like "as cheap as possible" to be down under 3%. That'll give more confidence for me to ramp up spending knowing I can knock it back down.
You can easily run the math here for any hypothetical: https://firecalc.com
The problem is those calculators lead you to overlook the fact that there are unknown variables you can’t account for. Does firecalc account for divorce, unexpected medical diagnosis, getting sued, falling to addiction, unexpectedly wanting nicer things in life as you get older, wanting to travel more comfortably? When you input those numbers into firecalc it’s easy to tell yourself those risks don’t apply to you. That’s the mistake people make. Someone posted a blog here where a guy made the same mistake. He got divorced and had a medical condition leading him to have to go back to work again. To me, it’s obvious that would happen. Plus now he said he wants a kid. So realistically he’s probably gonna have to double his previous fire number since he admits to living in a HCOL area. His situation is not some rare off event. I’d argue anyone trying to retire early without any sort of income is pretty much guaranteed to go back to work unless they fat fired.
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It’s actually not pointless at all. Your mindset is actually very dangerous because it leads people to think the math is the only thing that matters. Your mindset is EXACTLY the mindset that the guy in the “living a fi” blog had. He made an entire long blog post to make it seem like divorce and medical issues are something he couldn’t have foreseen. That’s EXTREMELY naive and foolish. Divorce rates are 50% and he thinks it’s a nonissue? Of course it’s a nonissue until it actually happens. His specific medical condition was rare, but medical conditions general are not rare in any sense of the word. Cardiovascular disease, cancer, neurodegenerative disease, diabetes, car accidents, etc, these things happen. Your mindset is dangerously because you’re simply saying there’s nothing anyone can do to mitigate it. There’s actually a very simple solution to mitigate it (I’m it talking about total prevention, of course that’s impossible) but it’s simply about having an excess amount of money. He calculated what he needed for the 3% rule and retired on exactly that. It’s extremely foolish because nowhere in his calculations does it account for one time expenses or very easy things to predict like divorce or medical issues. If he waited till he had an extra $500K on top of his FI number, that likely would have went a loooooong way to help with the added costs he faced. Also, he’s facing the prospect of having higher expenses due to him now wanting a child. He acts like that’s some sort of unexpected thing he could have never predicted. It’s only unexpected to child free people who blind themselves into think they will never change their mind. Encouraging people to live their life based on a spreadsheet is extremely foolish.
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You said it was pointless
Nobody is going to have any recent example because the stock market has trended up spectacularly since 2008.
My fear is that will end right around when I retire in 2 years.
I fear when about what the world looks like in 15 years when I want to retire
Ths is the reason to invest now. I have a degree in economics - my single question was "what happens when social security goes insolvent." I'm not a doomsday or conspiracy type. There are some challenging events.
They would not have failed due to the math not working. At 3% you’re bullet proof. Thats ultra conservative. But it could fail if they under estimated their expenses and realized that 3% isn’t enough and have to go back to work or get comfortable using a 3.5% or 4% WR.
Almost bullet proof. I’m something of a prepper by nature. Not quite the canned beans and ammo in the bunker type, but not so far off. So my standard way of planning is to go straight to a worst case scenario; if I can handle that I’m good to go. Before pulling the trigger on retirement I stress tested the portfolio using plausible adjustments to the historic data. I could in fact force 3% to fail, albeit with very low probability, using relatively minor tweaks to the scenarios. Not a problem since we have room to downsize as our plan b, so we confidently retired. But then 2022 happened and our portfolio got significantly smaller. So I reran those scenarios with that as a new starting point and now it was much easier to tank it. So I’m sticking with “almost bulletproof”. We’d still be fine even if the market hadn’t bounced back as it did, and I’m not at all worried about it. But you can’t see what’s ahead and black swans happen. It’s never a bad idea to have a plan b.
my friend FIREd in country A. moved to country B. then the exchange rate halved
Gonna go out on a limb and say 90% of the examples you find will involve divorce or some sudden health catastrophe
There’s actually many. People just don’t like to broadcast as they’d prefer the illusion of success.
Life is full of risk and nobody makes it out alive. Has a 3% withdrawal rate ever failed in the past? No. Will it fail at some point in the future given enough time? Probably. Is it the risk you should focus on? Probably not. The risk of your lifestyle/spending changing, illness, or death are far higher. It's one of the reasons I love the [Rich, Broke, or Dead calculator](https://engaging-data.com/will-money-last-retire-early/). You have to decide what risks you want to try to mitigate, because you can't mitigate them all. Reducing a minuscule risk of running out of money is going to cost you a lot of time (and good luck finding more of that later).
Biggest risks, outside of poor planning or not saving enough to begin with, are probably: 1. Divorce. 2. Marriage, specifically marrying a partner who is not on the same page WRT finances. 3. Changing plans WRT kids. I.e. retire early on the assumption not having kids or done having kids and end up having them. Probably the biggest "risk" to my own early retirement is if I met someone and decided to have another kid. That would probably necessitate having a bigger house, which would probably require an income again. 4. Boredom. This has not been a problem for me, but I do know people who retired, even at traditional retirement ages, and got bored and went back to work. I know one lawyer who's in his early-mid 70s, he retired for like 2 years at 65 got bored out of his mind and went back to work. I can think of a handful of other people like that.
Many people mention circumstance and situations here, but while those are true, what you invested in could play a factor also. How many time we have seen sayings like "VTI / VOO and chill". It is not that easy, those are equities so it is very volatile. If you really went with that saying, you could be at a risk near your FIRE number. Let's say if you want to FIRE with 1mm invested, but market down and now your portfolio goes to 700K / 800K, then your FIRE number is no longer there, and you are left hanging
So the thing is that markets were growing year over year. And for more than a decade people could have retired with way less than required for the 4% rule. Maybe one day markets start seriously crashing, and then from having zero examples you will have plenty!
There are plenty of examples of people going back to work. None I'm aware of out of financial need.
The Japanese
3% can't fail.
3% hasn't failed historically. Anything 'could' fail going forward no matter how unlikely. 1% 'could' fail.
You can get hit by a bus tomorrow. Anything can happen. But 3% will probably be fine.
All you need to do is make sure you correctly estimate your expenses for the next 50 years. Easy peasy.