Over the last two years, I’ve been in the unique position to talk with and consult dozens of people who are considering retiring early or are 1-2 years into their early retirement. Not glossy media coverage of how awesome early retirement is, but in-depth and private conversations.  I love that people are seeking Financial Independence! But I have a bone to pick with the 4% rule.

The history of the 4% rule is based on stock market calculations ran in different scenarios. The math is very compelling! No matter when you retire, you are safe to pull 4% from your stock portfolio and run very little risk of ever running out of money. I have 0% issue with the math behind the 4% rule.

Ah, if only life were as simple as math.

Therein lies the trouble with the 4% rule.  It’s all math and doesn’t deal with how we feel when the rubber hits the road: the mindset and emotions.


Here is the typical FIRE path (Financial Independence Retire Early)


Step 1: Experience burnout or overwhelm with a job. Think to yourself “I can’t do this forever, and in fact, I don’t want to.”

Step 2: Hear about FIRE. Learn about the 4% rule.

Step 3: Step up you investing game and reduce expenses. Invest like crazy for 5-15 years.

Step 4: Get close to the 4% rule lump sum needed. Feel hesitant. Start rethinking this whole thing. (Response 1: Increase your number and push out the date.) (Response 2: Email me for help.)


The fundamental problem with the 4% rule


People who achieve FIRE are most often “savers.”

In general, these three things are true:

  1. They enjoy earning money. (Payday is fun!)
  2. They like investing money. (Investing brings joy!)
  3. They love watching those investments grow!

They saved up this large lump sum so they would never have to work again!

But here’s what “never work again” looks like.

  1. They aren’t earning money. (sad face)
  2. They aren’t investing money. (sad face)
  3. They are pulling money from investments causing that balance to shrink. (really sad face)

Going from working full time to not working at all is a HUGE transition. And transitions deregulate us. Every time. It’s why we are stressed when we start a new job, buy a new home, move across the country or try to get all the kids out of the house in the morning.

95% of the time when I mentor people, it’s to help with life transitions. Because that’s when we need help. Especially if the transition is optional. No one is forcing you to do this hard thing, and you can back out at any time.

If your entire plan is based on the 4% rule, it looks like this.

Willingly opt for this huge life transition. While stopping three things you like (earning, investing, growing investments), AND at the same time start three things you don’t like (not earning, not investing, shrinking your investments).

I know people who have spent years doggedly persuing a FIRE plan solely based on the 4% rule only to find out they don’t want to pull 4% a year from their investments.

In my work, I see this being less problematic for people 55-75 years old (Although, have you met the people freaked out about taking mandatory distributions at 70? Yup, it happens!)

For people 30-55, living solely on a 4% withdrawal freaks them the heck out when the rubber hits the road!


Here is the order in which I see people happy about spending money:


(Happiest money spent) Pensions. Earned income. Social Security. Any fixed income. House hacking.
(Tolerable money spent) Rental income. Dividends. Interest payments.
(Unhappy money spent) Cash reserves. Pulling from investments.


What if we make a better (and happier) plan?


You can have 100% confidence in the 4% rule and still not enjoy pulling out 4% a year. (Me: frantically waving my hand!)

So what if you made a different plan? A plan that felt a little more palatable when the time comes to leave your 9-5 job.

If plan A is: amass a huge lump sum and pull 4% a year, what could plan B look like?

Plan B often ends up being the better plan. It’s more customized. It’s more refined to your own goals and values. It’s not one size fits all. It’s a Choose-Your-Own-Adventure plan!

When the off-the-shelf Plan A doesn’t fit, it’s time to look at Plan B. Plan B takes some flexible thinking and some creativity. But in the end, it’s a plan that you will pull the trigger on and enjoy.

In the upcoming posts, I want to talk about what “Flexible FIRE” looks like (um….kind of like my life!) and how we can Choose-Our-Own-Adventure for the space between our full-time job and not being able to work any longer.