FIRE planners underestimated spending needs

“Regular fire just means enough to live a typical middle class life. For most people about 100k does that so this is around 2.5-3M saved in liquid diversified assets. Chubby spend is around 200-250k, so around 5-6M, fatfire is more than that. Typically it means 10M+. I would not worry about comparing yourself to others. Everyone has different trajectories and opportunities; it really depends on what enough means for you and what type of life you want. There are several people here who have millio”

“FWIW- you may consider modeling in luxury / local inflation if you’re in a VHCOL location. Unfort it will throw the whole thing off, but worth being away of”

“It puts in the formula values and not the results? That would be useful. If it does that, I agree, it is a useful tool to create spreadsheets that can be proofed. If the values are only the results, it is not useful, only creating more work.”

“What discount rate should one use to do the present value calculation? Expected return of the set-aside assets?”

“And then look for the errors... The errors are easier to find in excel as you can see the math.”

“How do you account for random spikes in 25% of your spending over your 30 years of retirement, and if you take your modeled spikes out of your model, are you back to the 3% inflation number overall? If so, it is just another sandbag that you could accomplish by taking your SWR rate from 3.8% to 3.7% for example.”

They are in my spreadsheet

“You realize that spikes (where the price of something goes up and then back down again), are not a long term issue in budgeting right?”

“Use personal capital you can add life goals/changes in your life that will change your model. That tool is super helpful. I don’t really use their financial planners but the modeling is great and free.”

“Yup same. Not that hard. The big variable are tuition spikes and med care spikes but the rest is kind of following suite as long as you maintain current lifestyle”

“Claude is way better at this kind of thing than doing it yourself in excel. You can build yourself a model for a few different historical situations, tax/inflation environments, and spending increases. On your baseline, you’re fine especially if you work a few more years. You can spend more, especially if have flexibility to cut back if taxes go up / returns go down. Here's what I did in 1 min: https://claude.ai/artifact/2TjQqMERnrSxxD2e4MSVw”

“I don't model a reduction in expenses. That just doesn't make sense to me based on our experience and of watching family.”

“I originally modeled it year by year. Spreadsheet. Assets, income, etc against spend. Spend was baseline (inflated yearly) plus non-recurring like large private tuition, mortgage getting paid off, paid medical, then private medical, then Medicare+gap. It was very helpful to look at it like that. But in the end, I just dumped money in 529 for tuition, considered that not my money, paid off mortgage and let her run. (Ok, that’s not really true, spend all avails cash plus a giant new mortgage on a”

“What if the drop is next year and it's -50%? You'd essentially be spending all your income after tax on lifestyle for 3-4Y (if you still have that income coming in) and be left with a $5-$6M portfolio wanting to pull $500k from it. I'd model a Nikkei style outcome. The reality is even at your NW today without any significant crash just real 0% returns for 10Y...$500k inflation adjusted for 10Y is a stretch as it would wipe out more than half your portfolio.”

“So... here's the situation B est Scenario Costs Total Direct Costs: € 18.335,00 Total Contingency: € 3.667,00 Total Budget: € 22.002,00 Duration (Months): 44,85 Avg. Monthly Burn: € 490,57 While the budget can somehow be found, the duration in months is insanely high for a VS (at least, this is what I feel) We're developing a 3D Soulslike game in UE5, and even with a very barebone plan, estimed duration keeps being very high (and we cannot afford to hire someone else since the project is”

“I would suggest plugging all your numbers into ERE calculator like fireproofme.com and see what success rates come out”

What are you confused about?

“Yea only budgeting we do is checking spend end of year against retirement projections and withdrawal rate and adjust for next year if necessary, otherwise just spend as needed ☺️”

“For a VHCOL city, and a HCOL city? Without the costs of kids, and for one person, I'm thinking 150k for vhcol, and 120k for hcol city. what do others think? submitted by /u/Parking-Banana-212 [link] [comments]”

“You did not mention your annual spend that you use to schedule your fire target. If the $15k/year fits in it, you simply subtract the $200k from your liquid NW and re-calculate the impact to your fire schedule.”

“To get to Full FIRE my two main paths are.. Option A: COAST 15 years, then FIRE Work 2 days/week (ACA for health insurance) for 15 years to age 57, contributing $10k/year until $1.1mil saved. (After 57, I would need to withdraw about $50k total from RothIRA contributions and taxable brokerage to get me to 59.5) or Option B: GRIND 9 years, then FIRE I would work 5 days/week for 9 years to age 51, contributing $44k/year until $1.1mil saved. (After 51, I would need to withdraw about $200k total fro”

“The FIRE target is 25 * expense (4% rule). The difference between the levels is the size of the burn. 100 * expense is un-necessary.”

“The reason why it’s a 3x of the standard fire number is because I noticed there is very little wiggle room with standard fire. For example, if my parents got into financial trouble or need medical help which costs $, standard fire has no buffer to do. Or if you see a young aspiring entrepreneur from next generation needing assistance with their startup, you can do anything about it. The emergency fund comes from the idea of potential black-swan events. So imaging if Covid happens again or some k”

“It is a problem if you understand the basics of how FIRE works. You need 25x your expenses. The fact that someone is targeting fatfire doesn’t change that in any way. Someone can retire on $5MM, but spend $300K a year for their family in a HCOL area.”

“I started with $50k a year in the 1990s. Finally retired just a few years ago spending more than that a month. I kept working and letting my NW and spend grow.”

Interesting that you led with the success rate rather than a budget. I've been thinking other way around but your way definitely has merit especially with regards to my concern about oversaving.…

“Sure. We backed into the size of the fun money bucket to achieve an overall CoS score of 85%. For us, this was $75k/year for the first 30 years of retirement with YoY increases at standard 2.5% inflation.”

“I've been contemplating a similar bucketed spend as potentially the best way to plan out a longer fatfire retirement. Would you mind sharing some more about how you decided to size tranche 2? 1 is more self explanatory, 2 is obviously highly personal but also balancing on one end not feeling constrained, vs the other end being excessive to point of unnecessarily delaying retirement. Would love to know your thought process.”

“I underestimated how hard it is to break the mindset that income from work should exceed expenses as a marker of responsibility, prudence, and on some level “success”. Changing from saving to spending down assets is an emotional challenge even when intellectually I know I am almost certain to not run out in my lifetime. I think of the Dickens quote “Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness. Annual income twenty pounds, annual expenditure twenty”

Underestimated on car maintenance and entertainment (restaurants).

“In our modeling, it's zero. But we've built a two-tier spending plan. Tranche 1 is 'baseline' spending to sustain our current (ie immediately before retirement) lifestyle including spending like dinners out, gifts, home maintenance, and a modest ~$15k vacation etc. Tranche 2 is an extra bucket of 'fun money' every year for the first 30 years of retirement, for purely discretionary additional spending. If we ever need to reduce our spending, it's pretty easy to reduce”

“What's your COS baseline? Most simulators I've seen assume a zero baseline, so success simply means not running out of money. FatFIRE shouldn't be worried about running out of money, but I could see having to cut back the budget to chubbyFIRE if the worst sequence of returns risk materializes.”

“How old are you now? I’m still dragging on the “one more year” and pushing late 40s!”

“Agreed. Our current plan scores 85% Chance of Success. If i swap in our actual current spend after the first 6 months, and rerun the simulation, our CoS jumps to 92%.”