#Money mustache shockingly simple math series#

Well, it doesnвЂ™t really matter where we set the cutoff. Of course, maybe that second cohort would have retired in 2000, too, because they came so close to the savings goal. With the help of the additional contributions and the market recovery this cohort eventually reached the savings goal in 2004. The cohort behind it just fell short, then saw its portfolio drop to only slightly above 15x annual expenses. Two neighboring cohorts, one starting their FIRE savings path in October 1992 one in November 1992 retire over four years apart! How is that possible? Well, the first cohort just barely reached their target in the Summer of 2000 and retired exactly when the market peaked. This is a chart from the post from a few weeks ago (slightly different assumption because of the 60% savings rate, but the intuition is the same). How much of an impact will this have on Safe Withdrawal Rates? ThatвЂ™s the topic of todayвЂ™s postвЂ¦Д«efore we take a deep-dive into the numbers, let me again show why this clustering of retirement dates occurs. Money Mustache Method, youвЂ™ll only retire during a bull market! Money Mustache Simple Math method, youвЂ™ll mostly retire during a bull market, and often during the last part of the bull market, right before the peak and the next bear market! Retirement dates when using a 50% savings rate, 100% equity portfolio, 25x savings target. The endogenous retirement dates are in red.

They follow the big bull markets with extended gaps in between, see the chart below. Even though the starting dates are perfectly spread out, one each month, the retirement datesВ are not. They start with zero savings, then save 50% of their income (adjusted for CPI-inflation), invest in a 100% equity portfolio and retire when they reach 25-times annual spending. Specifically, letвЂ™s assume that every month, starting in 1871, we had sent off a new hypothetical generation on their path to FIRE. Very few savers would have reached that goal at the bottom of a bear market! DonвЂ™t believe me? LetвЂ™s look at some of the calculations from my post from a few weeks ago: The Shockingly Simple/Complicated/Random Math Behind Saving For Early Retirement. And potentially right before the next bear market. Money MustacheвЂ™s legendary вЂњSimple MathвЂќ post,В we are more likely to retire after an extended equity bull run.

If we specify a certain savings target, say 25x annual expenditures, as in Mr. Is the FIRE (Financial Independence Retire Early) community setting itself up for failure by making retirement conditional on having reached a certain savings target?

#Money mustache shockingly simple math series#

This post has been on my mind from day one and itвЂ™s also been a topic that was requested by readers in response to previous installments in the Safe Withdrawal Rate Series ( click here for Part 1):