Tracking total Net Worth. Yearly numbers are from December 31st of that year. Monthly numbers are from the first of that month.2017: 3.75%
2018: 9.14%
2019: 11.77%
2020: 21.82%
2021: 31.92%
| 2022 | FIRE | Lean FIRE |
| January: | 31.63% | 39.54% |
Update:Like everyone else, I've taken a hit this month. As an overall percentage of my FIRE goal, it's not so bad. Like always, it's somewhat jarring to see the sudden hit to my investments.
With that in mind, I did a quick check of the 4% rule against VTSAX. I made the assumption that someone starts with a $1,000,000 stash on December 1st 2020 and withdraws a flat $40,000 every year starting December 1st 2001 until December 1st 2021. I was doing it all by hand so I didn't adjust for inflation and I didn't add compounding dividend growth. I may do that later this week.
FIREing in December of 2000 is a pretty terrible time to do it. In a year, they went from $1,000,000 to $850,000. Due to drops in the market, they don't get back above that $850,000 until December 2006, where this person once again has $892,000 in their account. Unfortunately, just as things look like they may fully recover back above a clean million, the 2008 recession hits and drops this person back down to $454,000 - less than half of the original stash.
Not to be detoured, our person keeps going until the market makes its full recover in 2012, leaving our person with a stash of $650,000. From there things slowly inch their way up for six years until, in December of 2019, they have $1,047,000 in their investments...back above that original stash! It took 19 years, but our investor held the course and succeeded in seeing their stash completely recovered over a 20-year retirement and never had to deal with loss of income at any point during any down years.
The next two years, as I am sure you know, were really, really good for our retiree, jumping up to $1,200,000 in 2020 and then $1,430,000 in 2021. Even with January's 'correction', they're still sitting pretty at $1,411,000 in their VTSAX account.
It is insane to me that our person can easily survive through all the ups and downs of the market without issue. I'm excited to do a deeper dive into how dividends and a 2% inflation increase to the withdraw rate will effect things. And then, of course, there are contingencies. What if a chunk of that was in bonds? What if there was 1-year of savings to hold the person off in 2001 or 2008 (or both).
This is why I love the Trinity Study and all the subsequent studies on the 4% rule. This is why I love looking at how the markets have impacted real people. Staying the course can be very, very difficult emotionally, but it works. Again and again and again it works.
