Thought Question re FIRE Date and Number

[tooqk4u22]

Here's the scenario.  You have set a FIRE date and $ amount based on 4% SWR  (Lets say its 7/1/-- and $1mil).  It is now three months before your date today (4/1/--) and you look at your closing statement for portfolio dated the day before (3/31/--) and you HIT YOUR NUMBER....woohooo!  But then you look at what's going on in the market today (4/1/--) and you see that intraday market/your portfolio is down 20% and will stay there through your FIRE date. 

What do you do? Part time/side hustle/lowering expenses/etc is not permitted for this discussion.  This is more about the psychology of it so answer as honestly as you think you would feel. 

If you FIRE today, or on your target FIRE date, you would have a 5% WR, but if you FIRE'd yesterday it would have been 4% WR.  Based on the 4% rule you should still be fine but I suspect that psychology will cause most people to ignore the math/history aspect...myself included.

Feel free to explain your thoughts for discussion

[Retire-Canada]

If possible I'd move to PT work to cover my annual expenses so something like 15-20hrs/wk. If that wasn't feasible in a format I liked then I'd stay working FT and adding to my portfolio until I was back to 4%WR then FIRE.

[MsSindy]

For me, two things would weigh in:

 - how much 'fluff' is in my budget?  can I just cut back temporarily and be good to go - i.e. forego extended vacation this year, or is my budget bare bones, just enough to get me the hell out
 - how much do I hate my job?

It may also depend on your life situation - am I single with just me to worry about, or am I FIREing with a SAHP and little ones still in the house.  Much easier to take a risk if it's just me - I'd be willing to go bare bones to get me through the rough patches... not as easily done when you have people depending on you and your decisions - would probably be more conservative.

I answered based on my particular situation - don't totally hate my job, however, once I quit, I want to be out for good, and I have a low risk tolerance.  Also, I have a DH who is not interested in 'going bare bones to get through the rough patches' - not if working a little longer could lessen that.  If it was just me, I'd FIRE now!!

[Laura33]

So to make sure I am following:  As of 3/31, you had hit your $1MM target.  But you looked on 4/1, and your portfolio is already down 20%?  And you believe it will stay there for the next 3 months? (And why/how do you know this latter is true?)

Not sure this is math vs. psychology as much as math vs. math.  :-)  How much money I had (or didn't have) yesterday, or last week, or last year is irrelevant -- I could have had $800K or $1.2MM or $5MM yesterday.  But I am retiring today, and what I want to know is whether what I have now will provide me $40K/yr.  Since the 4% rule now says it won't, I keep plugging away. 

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years.  But the hypothetical here is *exactly* the kind of scenario in which the 4% rule tends to fail, so IMO it would be short-sighted to FIRE based on my NW yesterday, knowing that I have 20% less today -- you're relying on a general rule, while ignoring very pertinent data suggesting the rule won't work in your situation.  (Plus, frankly, 20% is a pretty big one-day dip, so there may be something significant going on in the world that I am paying attention to instead of debating FIRE. :-))

More realistically, though, my target number is going to have a little more leeway into it to defend against an early downturn -- I am conservative, so psychologically, if I want $40K/yr, I am probably targeting closer to $1.1MM, specifically as protection against this very scenario.  Plus, by that time, I will presumably have developed and implemented a plan to manage income needs to prevent me from over-withdrawing in your scenario (e.g., bond/CD ladder, dividend-paying stocks, RE, etc.).  So the real answer is that I would look at my portfolio in total and evaluate whether the last-minute market drop is going to require me to make more withdrawals from the market at its current low value, or whether I believe I have sufficient other income to ride out the dip, and make my decision accordingly.

[tooqk4u22]

So to make sure I am following:  As of 3/31, you had hit your $1MM target.  But you looked on 4/1, and your portfolio is already down 20%?  And you believe it will stay there for the next 3 months? (And why/how do you know this latter is true?)

Yes, and obviously you don't know about the latter but it is intended to isolate the question (ie - to assume that the recovery of the portfolio doesn't occur until after the target FIRE date - because if you assume it does happen by your target date then it would automatically eliminate one of the answers.

Not sure this is math vs. psychology as much as math vs. math.  :-)  How much money I had (or didn't have) yesterday, or last week, or last year is irrelevant -- I could have had $800K or $1.2MM or $5MM yesterday.  But I am retiring today, and what I want to know is whether what I have now will provide me $40K/yr.  Since the 4% rule now says it won't, I keep plugging away. 

That's not correct.  The inverse is that you are basically saying that if you quit yesterday (when the $1mil was hit) then you would go back to work today - the 4% rule allows for the possibility of that drop so you shouldn't need to go back to work.  So why would quitting today be any different.

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years. 

Nothing is guaranteed and if its just a figure that doesn't matter then why is there so much discussion about it. For this purpose, you could just as easily apply your own comfortable WR that could be 2%, 4%, 5% or some other number that you personally are comfortable with - but 4% is a commonly accepted number so it made sense to work with that to take out the side conversations of too conservative/aggressive.

But the hypothetical here is *exactly* the kind of scenario in which the 4% rule tends to fail, so IMO it would be short-sighted to FIRE based on my NW yesterday, knowing that I have 20% less today -- you're relying on a general rule, while ignoring very pertinent data suggesting the rule won't work in your situation.  (Plus, frankly, 20% is a pretty big one-day dip, so there may be something significant going on in the world that I am paying attention to instead of debating FIRE. :-))

Its possibly the type of scenario this would fail but not definitely or exactly.   I used 20% specifically because it had to be a big enough number to make you think about it - if I had said 2-5% I suspect that answers would not be difficult.  You can extrapolate this to be 20% down over a year instead of one day (ie you hit your number but kept working for a year but your portfolio went down 20%.) Still same question. 

[Zikoris]

I picked "Delay FIRE until portfolio recovery", because the sensible options apparently aren't allowed.

In reality, my response would probably be to wait until the date I planned on, since I would have worked that out with my employer in advance, and have no desire to screw over people I like. If my portfolio still hadn't totally recovered at that point, my response would be "Guess I'll be spending my first year of retirement  in Eastern Europe and Southeast Asia, for a fraction of the cost of Vancouver!".

[secondcor521]

I defined a set of conditions that I would feel comfortable FIRE'ing and then worked toward and until those conditions were met.  Those conditions were essentially a written plan that included a WR% and contingency plans in case things turned dicey on me after I pulled the plug.

Relevant to your question, I did *not* pick a particular FIRE date ahead of time.  I also seriously sat myself down and asked myself if I would truly feel comfortable relying on my assets and plan and contingency plans if the market did take a serious downturn immediately after I pulled the plug.

I hit those conditions about three years ago but was enjoying my job enough to keep going.  Knowing I was FI helped make the job more bearable for a while.  About a year and a half ago, the job started to get yucky, so I pulled the plug.

I had thought about your scenario as well...if I hated my job that badly that I would be checking my FIRE stash at the end of every trading day and figuring out if I could make it, I would probably quit, relax for a while, then figure out a way to make up the 20% difference.  If the job was going OK, I would probably work until the 20% recovered, which I would guess might take a year or two given the historical statistics on stock market pullbacks as well as that in my situation I would also be adding to the pile by saving 60% of my paycheck.

[NorthernBlitz]

Hard to say without being in the situation.

But, right now as an accumulator I'd be excited about a 20% downturn.

From the perspective of someone whose drawing down a 20% downturn could be dangerous...especially early on. I think I heard Wade Pfau way that portfolios that are down 50% in the first 10 years are at high risk to fail the 4% rule (i.e. sequence of returns risk).

So, if I didn't hate my job, I think I'd probably decide to try to work until the end of the year and see what happens. I'd be contributing as much as I could during that time because I'm winning because the market is down.

That being said, this sounds like a recipe for never leaving.

For context, I'm still probably 10 years away and I'm more in "stuff money in" mode as opposed to thinking about what to do when I start drawing down.

[Bateaux]

If I'd just hit my FIRE number I'd try to continue to work a while longer.  In fact, I'm doing it right now. I will work at least long enough to recession proof my FIRE number before doing so.  Basically I'm planning on 3% withdrawal rate of the 4% amount if that makes sense.  To put it into numbers, my desired spending is 60k annually in retirement.   My fire number @4% is 1.5 million in investments.  We've reached that.   So FIRE for us is locked in.  To get 6ok annully from 3% withdrawal rate we'll need 2 million in investments. By pricing in a 25% reduction in withdrawal rate I'm hoping we recession proof our FIRE plan.

[Bateaux]

So to make sure I am following:  As of 3/31, you had hit your $1MM target.  But you looked on 4/1, and your portfolio is already down 20%?  And you believe it will stay there for the next 3 months? (And why/how do you know this latter is true?)

Not sure this is math vs. psychology as much as math vs. math.  :-)  How much money I had (or didn't have) yesterday, or last week, or last year is irrelevant -- I could have had $800K or $1.2MM or $5MM yesterday.  But I am retiring today, and what I want to know is whether what I have now will provide me $40K/yr.  Since the 4% rule now says it won't, I keep plugging away. 

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years.  But the hypothetical here is *exactly* the kind of scenario in which the 4% rule tends to fail, so IMO it would be short-sighted to FIRE based on my NW yesterday, knowing that I have 20% less today -- you're relying on a general rule, while ignoring very pertinent data suggesting the rule won't work in your situation.  (Plus, frankly, 20% is a pretty big one-day dip, so there may be something significant going on in the world that I am paying attention to instead of debating FIRE. :-))

More realistically, though, my target number is going to have a little more leeway into it to defend against an early downturn -- I am conservative, so psychologically, if I want $40K/yr, I am probably targeting closer to $1.1MM, specifically as protection against this very scenario.  Plus, by that time, I will presumably have developed and implemented a plan to manage income needs to prevent me from over-withdrawing in your scenario (e.g., bond/CD ladder, dividend-paying stocks, RE, etc.).  So the real answer is that I would look at my portfolio in total and evaluate whether the last-minute market drop is going to require me to make more withdrawals from the market at its current low value, or whether I believe I have sufficient other income to ride out the dip, and make my decision accordingly.

I'm of the same mindset.  The FIRE number should be the amount needed to provide the desired income @4%.  I much prefer to save beyond the minimum and have a buffer.

[Retire-Canada]

By pricing in a 25% reduction in withdrawal rate I'm hoping we recession proof our FIRE plan.

You can achieve the same/similar end goal with other methods [ie. rising equity glidepath] that don't require the extra $500K and the time it takes to get it.

[Faramir]

I'd be annoyed at getting so close but I'd carry on working until I hit the FIRE target $.  If the market dropped 20% in a few days either the market was overvalued and/or the markets are too volatile for me to feel comfortable retiring.  In a 20% market drop scenario jobs may become hard to get so I'd keep stashing while I had one.

To get through the disappointment at getting so close I'd try to frame my thoughts as "Stocks are on sale, I'll keep working to buy them up while they're cheap".

[Laura33]

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years. 

Nothing is guaranteed and if its just a figure that doesn't matter then why is there so much discussion about it. For this purpose, you could just as easily apply your own comfortable WR that could be 2%, 4%, 5% or some other number that you personally are comfortable with - but 4% is a commonly accepted number so it made sense to work with that to take out the side conversations of too conservative/aggressive.

Ok, let me try this again.  The 4% rule isn't a rule.  It is a withdrawal rate that will last 30-ish years under most, but not all scenarios.  People chose 4% because it gave the best chance of a level withdrawal rate -- 2-3% you have a high chance of leaving a bunch of money behind, 5-6% you have a high chance of outliving your money and having to cut back dramatically at the end.  So it is all about playing the odds.

So assume you run a Monte Carlo simulation, and it runs 1000 different scenarios based on your investment allocations and various sequences of market returns, and in 950 of those, a 4% withdrawal rate will allow you to withdraw $40K plus inflation for 30+ years without running out of money.  So as of March 31, you have a 95% chance of making it.  Yay and huzzah.

But as of April 1 (Day 2), you now have a 20% market drop.  That significant of a drop will occur at the beginning of the 30-year period in only a few of those 1000 scenarios -- let's say 25 out of the 1000 (because those kinds of one-day drops are rare overall, and only a few simulations would have that drop occurring on Day 2).  But how did those 25 scenarios end?  My guess is that if you went back to the original 1000 scenarios and pulled the results for the 25 with the Day 2 big drop, the vast majority of those would fall within the 50-of-1000 that do NOT make it 30+ years.  Let's say, to be generous, that 10 of those 25 last 30 years.  So now, as of Day 2, your likelihood of success has gone from 95% (950 out of 1000) to 40% (10 out of 25).

So you can look at it either way.  You can look at April 1 being Day 1, in which case you are asking what is the likelihood of a 5% withdrawal rate ($40K/$1M) lasting 30 years.  Or you can look at March 31 being Day 1, but you now know that you are in the subset of 25 scenarios with immediate drops, and that only 10 of those work out well.  But either case, as of April 1, you absolutely do NOT have the same 95% chance of success you had the day before. 

So personally, I would make my decision based on the information available at the time I pulled the trigger. 

[Villanelle]

The whole "assume you can't work part time or lower expenses part" makes it impossible for me to answer, as that's very much part of our FIRE plan, as layered protection.  If your scenario happened 6 months (or 6 years) after FIRE, I wouldn't just continue to withdraw at the greater % and eat away at my portfolio.  I'd scale back.   So I guess I'd ask myself the same question if it happened before I quit--am I willing to scale back, or do I need to keep working (or go back to working, for the "after quitting scenario")?  I don't think I'd want to start FIRE already scaled back from where I hope to be, so I'd keep working, or look for part time work.   

Also, I consider this an "additional information" decision.  On March 31, with the information I had, retirement made sense for me.  On April 1, I got more information, and that information changes my decision.  It's not really much difference from finding out 2 years in to fire that one's family member has a major medical issue that will be very expensive to treat.  Two years ago, when quitting the job, it was the right choice.  But now, going back to work probably makes sense.  It's just that in the OP's scenario, the additional information came before the resignation letter was sent.   

[secondcor521]

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years. 

Nothing is guaranteed and if its just a figure that doesn't matter then why is there so much discussion about it. For this purpose, you could just as easily apply your own comfortable WR that could be 2%, 4%, 5% or some other number that you personally are comfortable with - but 4% is a commonly accepted number so it made sense to work with that to take out the side conversations of too conservative/aggressive.

<snip>

That significant of a drop will occur at the beginning of the 30-year period in only a few of those 1000 scenarios -- let's say 25 out of the 1000 (because those kinds of one-day drops are rare overall, and only a few simulations would have that drop occurring on Day 2).  But how did those 25 scenarios end?  My guess is that if you went back to the original 1000 scenarios and pulled the results for the 25 with the Day 2 big drop, the vast majority of those would fall within the 50-of-1000 that do NOT make it 30+ years.  Let's say, to be generous, that 10 of those 25 last 30 years.  So now, as of Day 2, your likelihood of success has gone from 95% (950 out of 1000) to 40% (10 out of 25).

<snip>

I was thinking about how rare 20% single day drops there are.  It turns out, if you look at the Dow (which I usually don't, but it's been around the longest), that there has only been one 20% single-day drop in the Dow.  Since the Dow has been around for about 100 years and there are about 252 trading days a year, there is, historically speaking, a 1 in 25,200 chance of a 20% drop in the Dow.

Interestingly, if you run cfiresim with the default values and look at what would have happened to someone retiring in 1987 with $1M and pulling 4% of their portfolio, they would have a shade over $3M today.

[Retire-Canada]

Interestingly, if you run cfiresim with the default values and look at what would have happened to someone retiring in 1987 with $1M and pulling 4% of their portfolio, they would have a shade over $3M today.

And they'd probably be kicking themselves for not working OMY! ;)

[tooqk4u22]

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years. 

Nothing is guaranteed and if its just a figure that doesn't matter then why is there so much discussion about it. For this purpose, you could just as easily apply your own comfortable WR that could be 2%, 4%, 5% or some other number that you personally are comfortable with - but 4% is a commonly accepted number so it made sense to work with that to take out the side conversations of too conservative/aggressive.

<snip>

That significant of a drop will occur at the beginning of the 30-year period in only a few of those 1000 scenarios -- let's say 25 out of the 1000 (because those kinds of one-day drops are rare overall, and only a few simulations would have that drop occurring on Day 2).  But how did those 25 scenarios end?  My guess is that if you went back to the original 1000 scenarios and pulled the results for the 25 with the Day 2 big drop, the vast majority of those would fall within the 50-of-1000 that do NOT make it 30+ years.  Let's say, to be generous, that 10 of those 25 last 30 years.  So now, as of Day 2, your likelihood of success has gone from 95% (950 out of 1000) to 40% (10 out of 25).

<snip>

I was thinking about how rare 20% single day drops there are.  It turns out, if you look at the Dow (which I usually don't, but it's been around the longest), that there has only been one 20% single-day drop in the Dow.  Since the Dow has been around for about 100 years and there are about 252 trading days a year, there is, historically speaking, a 1 in 25,200 chance of a 20% drop in the Dow.

Interestingly, if you run cfiresim with the default values and look at what would have happened to someone retiring in 1987 with $1M and pulling 4% of their portfolio, they would have a shade over $3M today.

The 20% in a day is an extreme assumption - that's the point.  (A less extreme version, as I suggested above would be to assume that it declined 20% over a year).  The 4% rule is reflecting the worse points in history such that it handicaps against the possibility of FIRE at the top of the market - but with the knowledge that the market has already dropped your SWR could be adjusted upward when based on the lower portfolio amount and still have the same effect.   

 That's why this is about psychology, because the 4% rule/SWR data says it should still be ok and you could end up with more money.  The math part suggests that if your portfolio had taken a 20% hit then you could afford a higher WR - just like retiring in a down market.  If you retired in 2010 I am fairly certain that if you fast forward 30 or whatever years it will prove out that you could afford a higher WR than 4%.

Based on the poll the psychology and fear would impact people and cause them to OMY for no real reason. 

[secondcor521]

To put it another way, the 4% rule isn't a guarantee -- it's just a figure that, for most people, under most market scenarios, will sustain a consistent withdrawal rate for 30+ years. 

Nothing is guaranteed and if its just a figure that doesn't matter then why is there so much discussion about it. For this purpose, you could just as easily apply your own comfortable WR that could be 2%, 4%, 5% or some other number that you personally are comfortable with - but 4% is a commonly accepted number so it made sense to work with that to take out the side conversations of too conservative/aggressive.

<snip>

That significant of a drop will occur at the beginning of the 30-year period in only a few of those 1000 scenarios -- let's say 25 out of the 1000 (because those kinds of one-day drops are rare overall, and only a few simulations would have that drop occurring on Day 2).  But how did those 25 scenarios end?  My guess is that if you went back to the original 1000 scenarios and pulled the results for the 25 with the Day 2 big drop, the vast majority of those would fall within the 50-of-1000 that do NOT make it 30+ years.  Let's say, to be generous, that 10 of those 25 last 30 years.  So now, as of Day 2, your likelihood of success has gone from 95% (950 out of 1000) to 40% (10 out of 25).

<snip>

I was thinking about how rare 20% single day drops there are.  It turns out, if you look at the Dow (which I usually don't, but it's been around the longest), that there has only been one 20% single-day drop in the Dow.  Since the Dow has been around for about 100 years and there are about 252 trading days a year, there is, historically speaking, a 1 in 25,200 chance of a 20% drop in the Dow.

Interestingly, if you run cfiresim with the default values and look at what would have happened to someone retiring in 1987 with $1M and pulling 4% of their portfolio, they would have a shade over $3M today.

The 20% in a day is an extreme assumption - that's the point.  (A less extreme version, as I suggested above would be to assume that it declined 20% over a year).  The 4% rule is reflecting the worse points in history such that it handicaps against the possibility of FIRE at the top of the market - but with the knowledge that the market has already dropped your SWR could be adjusted upward when based on the lower portfolio amount and still have the same effect.   

 That's why this is about psychology, because the 4% rule/SWR data says it should still be ok and you could end up with more money.  The math part suggests that if your portfolio had taken a 20% hit then you could afford a higher WR - just like retiring in a down market.  If you retired in 2010 I am fairly certain that if you fast forward 30 or whatever years it will prove out that you could afford a higher WR than 4%.

Based on the poll the psychology and fear would impact people and cause them to OMY for no real reason.

Yeah, I understand all that.

My point is that the numbers posted by the person above me were guesses, and they were too negative:  20% drops are rarer than that poster guessed, and the outcomes are better than that poster guessed.  This SWR stuff is dicey enough when one is planning based on SWAGs.  I prefer to use the actual data when possible (acknowledging that historical data doesn't predict the future, of course).

[BTDretire]

If the work isn't killing you, there is nothing wrong with having a buffer.
If after you retire with a buffer and it bothers you, spend it.
Or don't!

[Retire-Canada]

If the work isn't killing you, there is nothing wrong with having a buffer.

If it's a desk job it is killing you. You may not notice because you've been at it so long.

[RyanAtTanagra]

That's why this is about psychology, because the 4% rule/SWR data says it should still be ok and you could end up with more money.

But I don't think it does.  Read Laura's explanation again on why.  It doesn't matter that her actual numbers are made up, the general concept holds.  On 4/1 you got more information than you had on 3/31 which made you realize you are now in more-likely-to-fail subset of retirement periods that would have started on 3/31.  The SWR of 3/31 is not the same as 4/1 because the stash/market/real world circumstances are now completely different.  SWR changes over time due to many factors.  A 20% drop in a single day is very much a relevant factor.

Look at it another way.  Had you retired on 3/31, your success rate that day was 95%.  On 4/1 the market drops 20% do you think your success rate is still 95%?  Of course it's not, because now you're in one of the worse-case scenarios of early market drops.  So now your success rate on 4/1 is maybe 70%.  Are you ok with a 70% success rate?  If already retired I might stick it out for a bit and see how fast things recovered, but if I wasn't retired yet I'd keep working, HAPPILY, thankful it happened before I pulled the plug instead of after.

[Villanelle]

Think of it this way.  You, as an average random person, have a 0.000001% chance of dying from ObscureScaryDisease-itis, since it is a very rare disease.  So it's a pretty safe bet to make today that you won't die of OSD, and you are otherwise healthy and fairly young, so you most likely will live many more years.  Let's say there's a 95% chance you'll live for at least 30 more years. 

Tomorrow, you are diagnosed with OSD.  Sadly, it has a 90% mortality rate within 6 months of diagnosis, and 90% of the rest of those with OSD die within 5 years.

Are your chances of surviving for 30+ years today the same as they were yesterday?  Would you still put money down on surviving for 30+ years?  After all, that 0.000001% figure is still correct, as that is any given person's chance of dying of OSD.

No, your chances have changed significantly, because factored into that 0.000001% figure is the rarity of the disease.  But once you have determined that you are in that minority and actually have the disease, your outlook is very different because all of the outcomes that don't ever get OSD are removed from the problem set. 
 
the 4% SWR, and your changes of success include many, many scenarios.  Most of them don't include a 20% drop.  But now, once you know there is a definite 20% drop in your specific situation, all of those great, drop-free scenarios are removed from the calculation.  So our chances of success are worse. 

[Retire-Canada]

Maizeman posted these charts in another 4% thread. Shows mortality vs. going broke for perspective. This is for a 30yr old retiree.

[tooqk4u22]

That's why this is about psychology, because the 4% rule/SWR data says it should still be ok and you could end up with more money.

But I don't think it does.  Read Laura's explanation again on why.  It doesn't matter that her actual numbers are made up, the general concept holds.  On 4/1 you got more information than you had on 3/31 which made you realize you are now in more-likely-to-fail subset of retirement periods that would have started on 3/31.  The SWR of 3/31 is not the same as 4/1 because the stash/market/real world circumstances are now completely different.  SWR changes over time due to many factors.  A 20% drop in a single day is very much a relevant factor.

Look at it another way.  Had you retired on 3/31, your success rate that day was 95%.  On 4/1 the market drops 20% do you think your success rate is still 95%?  Of course it's not, because now you're in one of the worse-case scenarios of early market drops.  So now your success rate on 4/1 is maybe 70%.  Are you ok with a 70% success rate?  If already retired I might stick it out for a bit and see how fast things recovered, but if I wasn't retired yet I'd keep working, HAPPILY, thankful it happened before I pulled the plug instead of after.

I agree that it is a more informed decision and would be prudent to change your plans and would increase your likelihood of success....from 95% to 100%, but the math with a higher WR would still be fine as it is no different than if you had retired the day before without the additional information - that person retired 3/31 with a 4%, which is a figure that is based on the portfolio surviving the worst scenarios of the past - so as long as we don't hit a new "Worst" scenario (acknowledging that you wouldn't know if this scenario is or isn't) them FIRE'ing after a 20% drop with a higher WR (but a withdrawal amount equal to 4% of the day before) should be fine based on history (again, assuming that this isn't worse than any other time). 

This kitces post touches at this a bit. 

https://www.kitces.com/blog/the-ratcheting-safe-withdrawal-rate-a-more-dominant-version-of-the-4-rule/

[tooqk4u22]

Interestingly, if you run cfiresim with the default values and look at what would have happened to someone retiring in 1987 with $1M and pulling 4% of their portfolio, they would have a shade over $3M today.

And they'd probably be kicking themselves for not working OMY! ;)

Yup, that's what I am getting at.

If the work isn't killing you, there is nothing wrong with having a buffer.

If it's a desk job it is killing you. You may not notice because you've been at it so long.

The research says its as bad as smoking, and that is before you factor in the horrible air quality and artificial lighting.

Maizeman posted these charts in another 4% thread. Shows mortality vs. going broke for perspective. This is for a 30yr old retiree.

That should help put it in perspective - your money may last but you may not.

[RyanAtTanagra]

the math with a higher WR would still be fine as it is no different than if you had retired the day before without the additional information - that person retired 3/31 with a 4%, which is a figure that is based on the portfolio surviving the worst scenarios of the past - so as long as we don't hit a new "Worst" scenario (acknowledging that you wouldn't know if this scenario is or isn't) them FIRE'ing after a 20% drop with a higher WR (but a withdrawal amount equal to 4% of the day before) should be fine based on history (again, assuming that this isn't worse than any other time). 

I'm unclear on what you're saying.  You're saying the new information doesn't change the risk of failure?  Or that it doesn't change the risk of failure enough to justify changing plans?  What is the new risk of failure now that the first year of retirement included a 20% drop in market value?

It seems like you posed a question you already decided on an answer to, and are ignoring the things being said that go against that answer.

[tooqk4u22]

the math with a higher WR would still be fine as it is no different than if you had retired the day before without the additional information - that person retired 3/31 with a 4%, which is a figure that is based on the portfolio surviving the worst scenarios of the past - so as long as we don't hit a new "Worst" scenario (acknowledging that you wouldn't know if this scenario is or isn't) them FIRE'ing after a 20% drop with a higher WR (but a withdrawal amount equal to 4% of the day before) should be fine based on history (again, assuming that this isn't worse than any other time). 

I'm unclear on what you're saying.  You're saying the new information doesn't change the risk of failure?  Or that it doesn't change the risk of failure enough to justify changing plans?  What is the new risk of failure now that the first year of retirement included a 20% drop in market value?

It seems like you posed a question you already decided on an answer to, and are ignoring the things being said that go against that answer.

The risk of failure does not change at all from 3/31 to 4/1. The information changes, your risk tolerance may change, certainly your psychological and emotional state may change, your actions may change. But if you FIRE on $40k of $1MM on 3/31 or $40k of $800k on 4/1 - the outcome is no different as the event was going to happen regardless.  The primary concern for those that say it does is sequence of return risk and if that's the case then the inverse is equally as possible after a big downswing - the sequence of return upside.

If you FIRE anyway you believe in and are comfortable with the 4% SWR data and really there is no difference between a 4% WR and a 5% WR after a 20% drop.

If you wait for your date your probably hedging a bit to see if its temporary or if you can really be comfortable psychologically with the higher rate.

If you wait for your stash to rebuild then you really don't think the 4% rule is conservative/close to worst case scenario. 

[redbird]

I actually planned to originally work at least 1 year longer than I did. I quit early because of various life circumstances that prevented me from working another year longer.

But I'm an extremely cautious person and acquired a stash larger than I needed to. I'm at less than 3.5% right now, and thanks to stocks being generally on the rise ever since Trump got elected, that number keeps changing for the better.

[RyanAtTanagra]

The risk of failure does not change at all from 3/31 to 4/1.

It absolutely does, your likelihood of failure went up when you got the new information.  See the example above about getting a rare but deadly disease to think about it from another angle.  Your risk of failure on 3/31 was 5%.  But on 4/1 now you're at a 5% withdrawal rate so your risk of failure is now 15%.  We don't know the future, all we can do is estimate future risk, and that risk changes as we gain more information and the environment changes.  You're basically saying if you retire now with a 5% risk of failure, that 5% risk will never change again in the future.  Market could drop by 90% but you still think your risk of failure at that time is 5%?

[Giro]

Maybe I'm missing something, surely you aren't planning on withdrawing a year's salary from the market 1 day after you retire. 

I think there is more flexibility in FIRE then this scenario is taking into consideration.  When I spoke to my husband regarding FIRE, I threw in things like short term market timing for withdrawals for major purchases.  Also, when stocks are down and we need money to pay bills, we use bond market funds/lower risk funds, etc.

[VoteCthulu]

The scenario depends on a lot of other factors, but of the three options I would still fire on the planned day. I'm not too worried about market fluxuations, as long as there wasn't some large war or massive natural disaster that caused it.

What would certainly cause me to move back my date is if I found out I had some large unexpected expense, like health insurance suddenly spikes to 3x what I was expecting, my gf gets pregnant, I develope a taste for fine caviar, or something like that. My post fire budget going up 20% would be far more concerning than the market going down 20%, because most market dips are relatively short term.