“So now that we are about 18 months away from the end game where we stop working for money, sell everything we own and become traveling hobos, we are starting to look at our exit plan with a lot more seriousness. We are that much closer to determining the exact moment where the equation tells us it’s OK to officially call it quits and escape the cube farm. But should we just quit?
If we take the MIN-MAX approach, which focuses on minimizing the time worked for the maximum money, straight up quitting doesn’t make the most sense. Quitting simply means we will likely work the longest period of time in order to achieve our target number. Let’s analyze some possible scenarios …”
In his own words: FIRE … “It’s all built around our safe withdrawal rate assumption. Within the early retirement community many point to a safe withdrawal rate of 4% (25x annual expenses) being the target. Most calculators out there will estimate a 4% rate having a success rate of over 80%, which is really good. We on the other hand want a success rate approaching 100%. In order to do that you need to be at or below 3%. Doing this however, significantly increases the amount that you will need to save.”
When you get right down to it, FIRE is a math problem. And the granddaddy formula we all need to figure out is the Safe Withdrawal Rate (SWR) that will sustain us throughout retirement.