Do you incorporate inflation into your 4% estimate?
This article was a discouraging read. I would like to hear some thoughts. https://www.moneyunder30.com/how-realistic-is-financial-independence-in-your-30s
It may be a bit harsh to say the author is an idiot, but he's definitely misguided and does not correctly understand the 4% rule.
First, the 4% rule is NOT based upon living only off one's dividends/interest. If you have any assets yourself, you already have realized that a diversified equities fund will average closer to paying approximately 2% dividends, and even a high-interest savings account will pay more like 1% interest. Therefore, if you are going to use the 4% rule, you almost certainly will in part be selling some of your assets each year. The only way to avoid this is to save 50x your yearly expenses so that you have a 2% withdrawal rate instead of a 4% withdrawal rate.
Second, as already mentioned, the 4% rule is ALREADY INFLATION-ADJUSTED. In fact, since a well-diversified retirement portfolio will average more like 6-7% return per year, it is likely that over time, your account will grow faster than inflation, and you will end up dying with substantially more money than what you had at the time of retirement.
Third, none of these authors who are skeptical of FIRE seems to EVER take into account that people are not automatons with no ability to adjust their COL and/or their income. If I'm living on $50k (which is actually double my current expenditure rate for my own expenses, but whatever), and the market suddenly drops so that my portfolio is now 50% of what it was, am I seriously going to just keep merrily spending $50k as if nothing had happened until I run out of money? Of course not. I am going to notice, hmm, the market dropped, and I can't afford to spend $50k any more. In response, I would delay certain purchases, cut back discretionary spending on things like eating out and travel, and otherwise take steps to prevent depleting my account. On the income side, I might even consider going back to work PT to help offset my expenses and decrease the drain on my portfolio.
So what are the valid critiques of living on 4% for the FIRE crowd? To my mind, there are basically two.
First, the 4% rule is based upon a series of 30 year study periods. Since most early retirees can expect to have a RLE (retirement life expectancy) well beyond 30 years, it is reasonable to question whether the 4% rule holds for people like us versus people who retire in their mid to late 60s. Unfortunately, there is no way to definitively answer this question, and you will have to make some assumptions about the future based upon your own personal risk tolerance and expectations for what will happen.
Similarly, the criticism that past market performance does not guarantee future market performance is well-taken and cannot be summarily dismissed. That being said, the Trinity Study that generated the 4% rule covers some of the worst economic times in modern history (including The Great Depression), and while it's not impossible that future depressions/recessions could be even worse, it may not be realistic to assume that such a possibility is likely.