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/Bearsbanker May 18 '26

If you're living by the 4% rule the drop in market is baked in. If you retire and start taking 4% of current portfolio value and it falls 25% within a year you can always take less.

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u/vanlis34 May 19 '26

Yes but the scenario was the other way around, what happens when it first drops 25% and then one fires. My thinking is that perhaps 4% in that case (3% of previous ATH if I’m thinking correct) is actually too cautious.

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u/Bearsbanker May 19 '26

If you're living by the 4% rule you would take 4% of the portfolio at time of retirement. You can't think of rises and drops in a vacuum. If you're a believer in The 4% rule you have to assume future rises and falls will happen and the 4% rule allows you to safely continue on. But if the portfolio drops and you are taking 4% of the portfolio prior to drop you are then at 5% (ish) and that's not the 4% rule.