How Long Can FIRE Last?

If you are like me, you sometimes see articles in the personal finance press about people who are very young – in their 30s and 40s – who have quit their jobs and declared themselves FIRE’d (financially independent & retired early).

Recently, ABC’s Good Morning America ran this piece on a couple who retired very young and the ‘secret strategies’ they want to share with others. Inevitably, in stories like these, the Trinity Study framework is recommended by the young(ish) couple, who have based their FIRE escape on a 4% withdrawal rate. They recommend people save 25x their expected annual savings for retirement and then pull the plug. Simple, right?

Maybe not. These articles always get me nervous, because my understanding of William Bengen’s influential 1988 study is based on it employing a 30-year investment horizon. That is, a 60 year old that lives to be 90. Not a couple in their 30s or 40s that would need to plan for a lengthy 50 year retirement horizon. It seems to me that saving up for a retirement of a half-century in length would require more than just a 25x spending multiplier.

I decided to put the basic numbers of the ABC couple’s plan into FIREcalc to see how the Trinity Study parameters worked over the longer time horizon. I put in a $2M nest egg, $80K annual spending (4%), and a 50 year duration. It was able to quickly plot 99 periods of stock market history and the inputs held up about 78% of the time, with only 21 historical trends failing. That is, only about 20% of the time did the model show it likely that the couple would run out of money before age 90.

Going in, I would have thought the inputs would crash half the time or more. I was really surprised. Now I’m thinking that maybe the longer retirement horizon allows your investments to have more time to recover from the occasional economic recessions/depressions they are likely to encounter. Even if they are subjected to more challenges over the 50 years, they have more runway/opportunity to get back on track.

Of course, each person needs to determine at what percent of a Monte Carlo simulation they feel comfortable with. I usually think 85% is a good mark, but I can see many people being quite comfortable with 78%.

There is also the challenge that FIREcalc is only based on past performance. Our financial planner has a Monte Carlo tool that differs from FIREcalc in that it projects likelihood’s based on their estimate of future market dynamics. Those inputs tend to be a bit more conservative.

Still, I remain surprised that maybe these younger FIRE aficionados have figured out something that I missed at their age!

What do you think of their aggressiveness?

Image Credit: Pixabay

16 thoughts on “How Long Can FIRE Last?

  1. Too many unknowns in the world and in live to be plugged in for a 5 decade time horizon. Even at 3 decades, I want (and have) >95% in Monte Carlo analyses. That leaves me fairly confident. Call me, Mr. Conservative, Mr. FIREstation!

    Liked by 1 person

    1. I think above 85% is good, but our current FIREcalc % is actually 100%. Time for less frugality and more frivolity!


      1. Jollity. That’s a new word for me, despite working on that Joy-infused yogurt brand. 😉


  2. While I admire the optimism of the younger FIRE generation, age has made me slightly more conservative. Having now invested though Black Monday, the DotCom, 911, the Housing Bubble, and the Great Recession have all made me appreciate a +98% MC score. I truly hope they (the younger FIRE generation) have it right, because a fifty-plus year retirement would be an incredible opportunity to experience the world! I’m going to settle for trying to live to 100 to get my fifty years in!😉 Here’s to hoping we all nail it…Cheers!

    Liked by 1 person

    1. Ha – living to 100! That’s a good alternative. I probably won’t be traveling the world with the same zest at that age. I just hear a story about a woman in Russia that just passed away at 124 though!


  3. I am a physician in my late 40s. By all accounts, withdrawing 4% of my income producing assets already has me above my current annual burn rate.

    But there is a reason I have not pulled the plug and going far more conservative (thinking 5 more years and leave at age 53 (this is when my daughter goes to college):

    1) It is VERY hard to go back into medicine if you are out of it for any extended period of time so I damn sure want to make it so I don’t have to be forced to try and get back in if things go south.
    2) Rising costs of healthcare scares me. The earlier I retire, the longer the time I am in the “danger zone” between employer subsidized health insurance and medicare.
    3) College tuition rising also wants me to be conservative as I want my daughter to graduate college debt free (and if lucky graduate school).

    Liked by 1 person

    1. Those all sound like good reasons to stay working. I think it’s hard to go back to any career once you tell everyone you are leaving to be a good-off. Especially in medicine, where I would guess that there is also new learning, procedures, and innovations. Yes, health insurance is a real crap shoot. I think pre-existing coverage won’t go away ever again, but at what cost? I quit working when my son was a senior in HS, we had his college fully-funded at that point.


  4. These calculations are only taking into consideration the risk of portfolio failure. Many bankruptcies occur because of a perfect storm of unexpected costs e.g. a car accident, major medical problem, adult child with a crisis, etc. Take your pick. Calculating how likely, based on past performance of markets, it is your portfolio will fail and ignoring the rest is reckless at best. It also underestimates the SORR inherent in such a long retirement. Good luck to them, but I think over the course of their lives the number of unexpected events and their costs may well be a bit of a shock.


    1. Well put, Dave B – yes, there are many more considerations here than simple market/portfolio performance. Our own FIRE escape was based on 8 different approaches to ‘pressure testing’ our plan. Many considerations can be insured against, but life has too many surprises to cover them all!


  5. I like FIRECal also and one the great features is the ability to adjust / add inputs throughout the MC cycle. With just two adjustments to your scenario the success rate increased roughly 20% to 96% success. I added SS for one partner @ $18,000 per year starting at 67 and added flexibility to the of the model to spend down to 95% of the yearly amount, $80,000. Which provides a buffer during down markets. If you don’t believe SS will be around the success rate is at 94% with an average spend of $73,000.

    I think the moral of the story is that one needs to have flexibility in their budget but the flexibility does not need to be as severe as one might think. A slight shift in percentage(s) can greatly increase one’s ability to weather downturns.

    Liked by 1 person

    1. Those seem like reasonable adjustments to the model and boost the probability quite a bit. As I wrote, I expected the math wouldn’t work at all over a 50 year horizon, but it turns out from this perspective, it really does!


  6. Look at the efficient frontier by William Bernstein “The retirement calculator from Hell Part III” for a very different perspective. Portfolio success rates above 80% are likely meaningless, according to Dr. Bernstein.

    Liked by 1 person

    1. Being a history fan I couldn’t agree more. It begs the question of self-reliance, beyond the basics of emergency batteries/food stores/etc.. that an individual / family would need basically survive. Reminds me of a friend of a friend who has taken a Prepper approach for the future. Still retired ‘early’ but has put his new freedom to being prepared for the future.

      Liked by 1 person

      1. My son, the Eagle Scout, and I used to watch the Doomsday Preppers TV show. We have a small bookshelf with food, water, first aid, Radio, etc that we created for his Emergency Preparedness merit badge, but that’s all. It’s enough to get us through 3 days without power. No guns, gold, generator, or strategies to defend ourselves against the ‘gubmint’ or wandering marauders, though! 😉


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