Is $4,000,000 still a good FIRE number?

4 years ago when I started MyRoadToFire I got a good amount of readers because the FIRE community was defining fatFIRE as having a net worth of $2,500,000 but I, and many of you, believed that to be too low. In 2019, I strongly believed that having $4 million would comfortably allow a family to FIRE. Fast forward to the end of 2023, I strongly believe that having only $4 million would be extremely risky for that same family to FIRE. So was I wrong? As one of my most annoying managers used to say “yes and no.”

Why I was right

My analysis was done in 2019. If I could go back in time and I know exactly what I knew then and nothing else, I would still strongly believe that $4m was a safe FIRE number. For perspective, the house that I’m living in right now would have cost $500k instead of $1m. Mortgage rates were 3-4% instead of 7-8%. However, the ultimate measure of success would have been if someone had $4m and FIRE’d in 2019, then would they still feel comfortable not working until now, 2023? I would argue that they would have a couple of rough years and some near heart attacks, but as long as they stayed the course and didn’t sell any assets they would still be fine. This would be especially true if they had already locked in a mortgage or outright bought a house.

But everyone reading the blog, including myself, are not people who were going to FIRE in 2019. So whatever number I put out there should stand the test of time, at least for a couple of years. This is where I think I was wrong.

Why I was wrong

When I coach folks and help them build their FIRE plans I always ask them to pick a super conservative FIRE number, especially if they cannot achieve it in the next decade. That is because the longer the time horizon, the harder it is to predict how the economics will change. For myself, I knew I was ~3y out from FIRE in 2019. A market crash was something I was worried about, but inflation wasn’t something I thought could be this bad in just a short amount of time. I thought that whatever number I came up with in 2019 wouldn’t be too far off in 2022.

If we take inflation into account, the $4 million in 2019 would need to be $4.9 million in 2023 in order to maintain the same purchasing power. After some back-of-the-napkin math, $4.9 million in today’s dollars is actually a reasonable FIRE number assuming that your primary residence is already owned.

FIRE update

I am +$737,047 ahead of my FIRE schedule. I own significant positions in FB and MSFT and they continue to climb back to their all-time highs. I guess being lucky is better than being good. I’ve accepted the risk of holding on to those companies and it’s paying off. At some point, I would like to offload most of them but I haven’t because I’m not ready to pay the capital gains taxes on it.

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The Post-Financial Independence Life No One Talks About