FIRE Number
I know this topic has been raised many times here but after reading some threads, I still don’t know how that number is calculated. When someone says “my FIRE number is $4M” what exactly are they counting? Does it include money in retirement accounts? What about equity in primary home? Vehicle? In my opinion, those should not be counted in the amount of money needed to retire early. By definition, retiring early means you don’t have access to retirement savings and you can’t generate income from primary home or your vehicle. So shouldn’t we be focusing on money that can generate income (investments, cash, rental properties) versus expenses when trying to figure how much money is needed to achive FIRE? If my monthly expenses is $7-8K, how much investable money is needed to generate that income? (Let’s say the investable $ is 1/3 real estate, 1/3 index funds, 1/3 bonds and cash.) I’m thinking somewhere between $2M and $3M. What do you guys think?
I only include money in accounts slated for retirement spending. So wouldn't include house because I need it to live.
I see your point about not having access to retirement accounts when retiring early but I’m almost certain people count 401ks/IRAs towards reaching their “FI” number...
No one should ever include cars in their fire numbers. It's a depreciating asset at best. You should also not include your primary residence unless your plan is to sell it and move to a cheaper house. Retirement accounts can be counted as you can start accessing some of that money early like Roth principal amount.
You have to get a personalized retirement planning analysis, and luckily there are very helpful tools out there. Sign up for PersonalCapital for free ( https://share.personalcapital.com/x/dAZF5R ), add all of your accounts, enter all your personal numbers (e.g. monthly expenses, goals, savings rate, other net worth contributors such as owning a home), and then PersonalCapital runs the simulations for you, to give you best / worst / median case scenarios. Do it, highly recommended, better than textbook info of 4% rule.
You should do about 25 times expected annual expenses. Include children if you are planning to have any (more) and health insurance as well as other anticipated increases. Leave some room for belt tightening as well in case things go south. The number is a rough number and you should be ready to make changes to your lifestyle and income generation after retirement if things change.
https://www.myroadtofire.com/blog/what-is-a-good-fire-number
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Yearly expenses *25 will give you what you need for a 4% swr. I would not include home and cars, though some people do since you could sell if you were in a crunch.
If you sell your home you’re homeless though so 🤷🏻♀️
You can down size, move to a lcol area and squeeze a little more out of your money until you die in the streets due to medical bills