Having read a significant part of people's FIRE strategy, it seems like the majority of the people use investable assets with a target WR and spending to come up with a target number and date for ER. Most of this is extrapolated on historical investment returns (supported by the 4 pillars of investing, bogglehead, etc).
I find myself leaning toward another approach -- which is another popular one -- in which you generate enough passive income, which grows over time that hopefully match inflation, so that you don't ever need to touch principal. Passive income comes from dividend, interest, annuities, rentals.
Does anybody else approach FIRE this way?
For me, while I can safely use the 4% WR of my investable assets to cover my current expenses, I still feel uncomfortable that this is enough. Whereas my passive income from my taxable accounts can now cover about 80% of my expenses, I hope to increase it to 100% by next year. At this crossover point (the term used by your money or your life), my strategy is then to shift from living off my salary to living off off my passive income and transfer all my earnings into passive instruments so that my passive income goes up even more over time. Once it hits 175% of my annual spending, I'd feel confident that I can forever live off my assets and therefore, I am "financial independent" without significant risk of going back to work.
In this equation, I don't consider any assets or returns from pre-tax, SS, and a small pension I have. I just categorize these assets in the back of my mind as ones to leverage when I truly "retire" at 65, which is still far off for me to think about ever touching.
I find myself leaning toward another approach -- which is another popular one -- in which you generate enough passive income, which grows over time that hopefully match inflation, so that you don't ever need to touch principal. Passive income comes from dividend, interest, annuities, rentals.
Does anybody else approach FIRE this way?
For me, while I can safely use the 4% WR of my investable assets to cover my current expenses, I still feel uncomfortable that this is enough. Whereas my passive income from my taxable accounts can now cover about 80% of my expenses, I hope to increase it to 100% by next year. At this crossover point (the term used by your money or your life), my strategy is then to shift from living off my salary to living off off my passive income and transfer all my earnings into passive instruments so that my passive income goes up even more over time. Once it hits 175% of my annual spending, I'd feel confident that I can forever live off my assets and therefore, I am "financial independent" without significant risk of going back to work.
In this equation, I don't consider any assets or returns from pre-tax, SS, and a small pension I have. I just categorize these assets in the back of my mind as ones to leverage when I truly "retire" at 65, which is still far off for me to think about ever touching.
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