Well, it depends. When to FIRE and how much to FIRE with are pretty individual decisions, even though there are a lot of math and numbers out there.
If you have $1M today ($800K + $200K side fund) and spend $40K per year, that's a standard 4% rule. If you buy into the 4% rule, have health care taken care of, know what your expenses are, etc., etc., then that's fine.
The future growth (at 6% or whatever) is already baked into the 4% rule. In other words, the 4% rule assumes / counts on / includes investment returns. The 6% is not somehow "extra" that the 4% rule is ignoring.
The 4% rule also includes inflation, by the way.
If I bought into the 4% rule (I do), and if I had $650K now, I'd only FIRE now if I thought I could live on 4% * $650K = $26K per year.
(Yeah, I know it's not a rule. Whatever.)
I agree that it's "baked into the rule" after you start withdrawing funds, but is it really baked into the rule during period where you aren't drawing down on it at all? I was making that distinction. I mean, what if someone in my situation had a $400K transitional fund and planned to let the nest egg ride for 5 years, and then was going to start making conversions, meaning that all of that money would be growing for 10 years (hopefully) until the first converted funds were finally withdrawn? Wouldn't it be a safe practice to anticipate that the nest egg would be higher after all of that time untouched and wouldn't that affect your initial estimated SWR?
Just trying to figure this stuff out better! I appreciate the feedback.
I understand what you're saying (and I think I understand why).
You're trying to separate and segregate your FIRE stash into two piles: your "nest egg" pile and your "transitional fund" pile. I would not do that. I would combine both into one large pile, and calculate your SWR on that (like I did in my earlier post). So if you want $40K in spending, and want to do a 4% WR, you need $1M, regardless of how you split/combine/separate/side fund it.
The 4% rule starts whenever you start drawing from the nest egg, regardless of how many piles it's divided in to and regardless of which pile you choose to take from in any given year. (Before you start withdrawing, you can certainly expect/plan/hope for your portfolio to grow, and it probably will.)
Yes, if you leave a portion of your pile untouched and invested, it'll probably grow *in the future*. Including that *future* growth to support a *initial* SWR is really not following the 4% rule: "I've got $650K now in one fund and $200K now in another fund, and I'm spending $40K so ... <waves hands> ... I really have $1M and am following the 4% rule." Nope. You've got $850K and spending $40K, which is a 4.7% withdrawal rate. Yes, it might work. No, you're not "complying" with the 4% rule.
It seems you want to FIRE as early as possible. I wanted to as well. Just make sure you understand how the 4% rule works and is calculated and the studies it is based on, and then be honest about how you're counting things. At times I was including the proverbial change under the sofa cushions in my FIRE stash just to get it here sooner. If you want to stretch and take a risk, you certainly can. But be honest with yourself and your partner if that is what you're doing, because they need to understand and accept whatever risks are involved in the options being discussed.