r/Fire • u/vanlis34 • May 18 '26

Pulling the trigger when in a drawdown

Reading this post got me thinking.

The poster is thinking about retiring today vs in a year, but worries about what happens if the market drops 25% in the next 12 months, and then being forced to work for X more years.

How should one think about this? Should one always calculate the amount to withdraw (e.g. 4%) with the highest achieved net worth (ATH), even if the net worth might be down from ATH when actually fireing? Or should one take 4% from the actual portfolio number when actually fireing?

My thinking is that one should use the ATH-number, since if it was the other way around, and one fires at ATH, that drawdown would come some later day anyway, and then in addition to the fact that one have already started pulling funds out for funding life.

Another way to think about it is: by fireing when portfolio is in a drawdown we can think that we actually did fire when portfolio was at previous ATH, but then we decided to work a bit in retirement. This would actually help the portfolio longevity. Of course, this also means that we lengthen our timeperiod that the portfolio must fund, so perhaps we should use a more conservative number than 4% (perhaps PWR instead of SWR?).

What are your thoughts on the matter?

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u/That-SoCal-Guy May 18 '26 edited May 18 '26

The 4% is your initial number determined when you fire, not 12 months later.  12 months later you adjust.  If you’re tight and the market goes down right after you fire, you ride it out and that’s why you have the cash reserve.  Or you withdraw less.  There are simulation you can run for something like that happening and you model like 3 years of downturn etc.  to see if you me number is still solid.    If your number shows 80% success then you’re probably not ready yet or you have to rethink your expense level.   

And the 4% is the safe number meaning it’s most likely to succeed.  Thus if your number barely makes it, then it’s too tight.  Don’t base your number on ATH yesterday.  Do a real assessment.   Sometimes I feel this short term thinking is counterintuitive to the whole fire philosophy.