Methodology

The 4% Rule & Withdrawal Rates

The '4% Rule' comes from the Trinity Study, suggesting that withdrawing 4% of your portfolio in the first year of retirement, adjusted for inflation, gives a high probability of success over 30 years. However, for FIRE adherents, retirement may last 40-50 years, making 4% risky. We recommend a dynamic strategy: maintain withdrawals in bull markets but reduce spending in downturns. Many experts suggest a corrected 'Safe Withdrawal Rate' of 3.25% - 3.5% for longer horizons.

Purchasing Power & Personal Inflation

Inflation is the silent killer in long-term planning. Official CPI data often understates personal cost increases (especially healthcare and housing). Fire Path incorporates 'Real Purchasing Power' into our models. We advise users to add a 0.5% - 1% buffer to long-term inflation assumptions (e.g., setting it to 3% - 3.5%) to ensure quality of life isn't eroded by rising prices in old age.

Returns & Sequence of Return Risk

Historical data shows US stocks return ~7-10% nominally, but 'averages' can be misleading. 'Sequence of Return Risk' in early retirement is critical: a market crash in the first few years can verify deplete your portfolio. Our model doesn't guarantee fixed annual returns; instead, we emphasize asset allocation and encourage users to simulate their plan's resilience under poor market conditions.