Timing is critical when it comes to investing, and there’s a lot of it to go around. You can’t just jump into the market with your eyes closed – you need to know what the market is doing. The market is up today, but will it be down tomorrow? Is there any reason for a bull market to stop?

We’re in the middle of a major financial crisis. The stock market has crashed and people are scared. At stash-the-cash, we want to help you through this without losing any money. That’s why we’re going to give you some advice. First, make sure you’re really in a financial emergency. There are a lot of people out there who buy stocks just to make more money.  Remember, it doesn’t matter how much money you make, it’s how much money you keep. So don’t let your emotions drive you into a bad decision.

A series of events that have been going on for years has a simple effect on most people: you have less money in your wallet. Here’s the crux of the matter: as the years go by, you accumulate debt. You’re likely to realize bad news at some point during your career, and you’ll likely realize that you’re in a hole.

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If you plan to retire early based on a withdrawal strategy, base your FIRE plan on historical data. So what happens if the future is very different from the past?

Of course we can’t predict the future. So what can we do? We can improve our FIRE plan with a margin of safety!

In this article, we’ll look at some ways to make your FIRE planning even stronger.

Some margin of safety is required

If you plan your FIRE plan exactly as you know it, you run the risk of running out of money at retirement. Here are three examples of what can go wrong with FIRE planning.

First, If you think you will need enough money for your 50 year retirement, you can plan for exactly 50 years. But what happens if you live longer than expected? Theoretically, you could run out of money the day after the 50 years are up.

Second, When planning a fire, rely on historical data to increase your chances of success. Historically, the return on the stock market after inflation has been about 8%. If the stock market only offers an average return of 6% after inflation, your real chances of success will be much lower than you expected.

Third, when creating your FIRE plan, assume the expected expenses during your retirement. But that may change in the future. For example, you may experience unexpected inflation in some of your expenses. If your costs increase by 10%, your entire FIRE plan is in jeopardy.

If you want to increase your chances of success in these scenarios, you need to add some margin of safety to your FIRE plan. Fortunately, there are many ways to do this.

However, adding a margin of safety to your plan comes at a price. A safe plan means it will be harder to achieve your FIRE goal. You may have to work for several years to accumulate enough money to become financially independent. It is therefore important to maintain a balance between under- and over-certainty.

Remember, all of these methods are optional and it is up to you to decide if you want to include them in your FIRE plan.

Expected increased costs

The first way to add a margin of safety to your FIRE plan is to factor in higher costs.

To calculate your FIRE, use your annual expenses as a baseline. So your entire FIRE plan is only for these annual expenses. By default, your FIRE plan only takes inflation into account. So if you increase your spending by 10% due to a lifestyle change, you are putting your entire plan at risk.

So you need to be careful when estimating the cost of your retirement. Knowing how much you’re going to spend is much harder than you think. And there’s no way to be sure. It’s always an estimate.

A simple way to get more certainty is to count on higher costs than estimated. For example, you can plan to spend 10% more. So if you spend 10% more than you planned for retirement, your FIRE plan will still work.

But an increase in planned spending implies a corresponding increase in the number of FIs. Adding 10% to planned spending is equivalent to adding 10% to the number of FUs. Therefore, you will probably need an additional 10% to reach your goal.

It is up to each FIRE planner to decide what percentage to add to their estimated expenses. Some people are comfortable with the lack of a margin of safety. Since we can only estimate our pension costs, it makes sense to increase that estimate to get more certainty. I’ll probably use 10% when scheduling FIRE to be safe.

Do not pursue 100% IF rate

In theory, you are financially independent and can retire when your net worth reaches 100% of your FI.

But there is a problem with this approach: Risk/Return Consequences. In fact, the starting point of FIRE is not always the same. If you have 100% FI at the end of the falling market, you are in great shape. However, if you achieve a 100% return at the top of a bull market, you could be in trouble if the market falls. Of course, we don’t know these two things until after the fact. But this shows that being 100% FE is not always enough, and depends on the market.

I see two ways to bring some margin of safety into this part of the plan:

  1. You can wait a few years after you receive 100% FO before moving forward with this plan. This gives you an important buffer for the years to come.
  2. You can wait until you have more than 100% FI, for example. B. 110% FI. A higher IF goal will significantly increase your chances of success and reduce your reliance on a return sequence.

I think a higher percentage makes the most sense here. If you aim for 110% (or more or less, it’s up to you!), you will significantly increase the security of your FIRE plan.

Again, increase the time it takes to reach your goal. For example, raising your goal to 110% of FI is the same as trying to reach 110% of your FI grade. You will need 10% more time to reach this goal.

Strive for higher pass rates

If you are choosing a safe withdrawal rate, you will probably use the success rate as your main measure when making your choice.

The target success rate you choose will impact the safe withdrawal rate (SWR) you choose and your FIRE plan. For example, a scheme with a 75% success rate is likely to result in a higher uptake rate than a scheme with a 95% success rate.

So as you raise your target for success, you will also have a safer plan. If you z. For example, if you had planned for a 90% success rate, you can aim for 95% instead.

It’s hard to estimate what impact this will have on your journey to FIRE. The only way it will really change is if you change your SWR. Perhaps the increased odds you seek will not even change your SRT. But if it reduces your total return by 0.1%, it will significantly increase your FI and the time it takes to achieve it. But a lower withdrawal rate also has a significant impact on the safety of your FIRE plan.

You can check this with my FIRE calculator. For example, with an 80/20 portfolio and a retirement age of 50, you will need the following withdrawal rate:

  • 4% to get an 85% chance of success
  • 3.8% to have a 90% chance of success.
  • 3.65% for a 95% chance of success
  • 3.2% for a 100% chance of success.

This way, you can find your withdrawal rate based on your target success rate. And as you can see, this can have a significant impact on the speed at which money is withdrawn. But it can also make a very big difference in the success rate of your FIRE plan.

Select a lower extraction speed

Finally, an effective way to give your spending a little more security is to opt for a lower payment rate.

A lower withdrawal rate means you are withdrawing (and spending) less money each year. This will significantly increase your chances of success. For example, if you planned to withdraw 3.75%, you can withdraw 3.6% instead. A lower withdrawal rate will significantly affect your chances of success.

But it also means putting more money into your retirement. So a lower withdrawal rate means more FIs and a longer time to accumulate that money.

For an annual expenditure of, say, CHF 100,000, you get the following IF figures:

  • 2,500,000 CHF with a withdrawal rate of 4%.
  • CHF 2,666,666 with a withdrawal rate of 3.75%.
  • CHF 2,857,142 at a levy rate of 3.5%.

So we see that the effect of a lower withdrawal rate on your FI score is very significant. So it makes no sense to use a 2% withdrawal just because you want to be sure you can retire, when 3.25% already guarantees success.


There are several ways to add a margin of safety to your FIRE plan. They can make a significant contribution to improving the safety of the plan.

But more safety margin isn’t free either. Increasing your FI by 10% means that you need 10% more money. Therefore, you will probably need an additional 10% to reach this goal.

So a balance must be struck for proper safety. If you have too much, you will be left with a lot of money at the end of your retirement. This can be interesting if you plan to leave your heirs a lot of money. But it also means you could have retired earlier.

Personally, I think I’ll use a 10% margin of safety in my FIRE plan. But of course, I won’t be financially independent for at least 15 years. This gives me many more years to review my FIRE plan. Things can change in this day and age.

I think it’s very important to build a margin of safety into your FIRE plan. But if you add too much, it reduces your chances of achieving your FIRE goal. Be careful not to overdo it!

There are other ways to increase your chances of success. For example, you may be willing to earn extra somehow if the stock market falls too much. Or you should be able to lower your costs somehow in a declining market. However, this is a reactive measure rather than a plan with a margin of safety.

What about you? How do I add a safety margin to my FIRE plan?

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Sir, I want to thank you for your support. Poor Swiss is the author of thepoorswiss.com. In 2017, he realized he was caught up in lifestyle inflation. He decided to reduce his expenses and increase his income. This blog tells his story and his conclusions. In 2019, he set aside more than 50% of his income. His goal is to become financially independent. Here you can send a message to Mr. Send Bad Swiss.FIRE (the FIRE movement being the acronym for the four rules of embrace, invest, retire, and enjoy) is a popular term, but it has become overused. It is supposed to be a shorthand term for the following: 1. Embrace the idea of retiring early at age 30 or 35, and 2. Invest that money in a way that gives you an income for the rest of your life. In the above definition, pursuing FIRE is considered “investing” and then “retiring” is considered an “early retirement.”. Read more about fire withdrawal calculator and let us know what you think.

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