Most people target 4% withdrawals if you want to live off the nest egg in perpituity, which in this case, would be $12k/year. Less safe investments would earn you a higher return at the risk of sacrificing principal.

Edit: Something important to note is that you can live very well in other countries for what would be considered the poverty floor in the US. For $2k/month, I can pay for a very nice luxury apartment, day camp, and a nanny for my kids in parts of South America.

Ah... no, you can't. You just think you can, because you've never tried. I've actually lived off that magical 2K number with my family in a (large city in a) 3rd world country. It was edgy, we hardly broke even every month, and any 1-time event (s.a medical) was covered from savings. Maybe if you go super rural you can pull that off. Keep us posted!

I know a family who has been doing it for 10+ years, and they publish their budget online. It can be done!

With that said, our actual income will be ~7x our budget, so there’s plenty of cushion.

That money gets you a good life anywhere, except for US and some big capitals/tech cities.

Is that 4% before or after inflation? A 4% real return (aka 7% if inflation is 3%) already requires quite risky investments.

The Trinity study's 4% "safe withdrawal rate" is actually a bit technical:

The amount you withdraw from your portfolio, in perpetuity is:

"4% of your portfolio's value on the day you retire, adjusting annually for inflation."

Say, on the day you retire, your portfolio's value is $100,000. For the next thirty years, you withdraw $4,000 annually (adjusted for inflation). You now have $96,000 in your portfolio.

Say the year after you retire, your portfolio has done supremely well, and doubled in value to $192,000, and inflation has been 0%. You get to withdraw: $4,000. You now have $188,000 in your porfoloio.

The next year, your portfolio tanks by 50%, and it is now worth $ $94,000 (and inflation is still 0%). You get to withdraw: $4,000. Your portfolio is now worth $90,000.

(There are additional rules about the composition of the portfolio too.)

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Historically, by following this rule, there has been no thirty-year period (since records of the US Stock market have been kept) where the portfolio would fail--where you wouldn't be able to withdraw your $4,000. And the vast majority of the time, you would end up with a very, very much larger value.

It is a fairly conservative system and keeps purchasing power constant, which is useful.

But it is only a starting point. If you will have a longer retirement, don't follow their composition rules, or don't need constant purchasing power (most retirees don't), then you should adjust it as appropriate.

S&P500 90 year average is 9.8%. people FIREing typically have nearly all their money invested in low cost index funds.

You know what they say in the fine print - past performance is not a guarantee of future results...

And one of those years the return was -37%. Not a safe return.

9.8% is not a safe return, no, which is why the safe return is about 7%. The worst-performing 30-year period averaged around 7%, which is what the 4% withdraw rate is calculated from (accounting for inflation).

Obviously anything can happen, the world could end, whatever; there's no truly 'safe' option. But it's reasonable.

It does assume the continuation of American exceptionalism. I believe that a better benchmark would be a basket of stock markets rather than just the S&P 500.

That basket would be dominated by the S&P 500 so it wouldn't change things too drastically, but it would pull that number down somewhat.

The 4% safe withdrawal rate usually refers to the net return. To your point, in today's interest rate environment that would mean aiming for >7%+ returns.

Also, it seemed that the couple were willing to move to a lower cost of living location/country so their safe withdrawal rate would take them further. I don't think children were factored into the base equation, although it's entirely possible one or both of them could work part-time to augment income during child-rearing years.

It is a pretty tight budget. Although they plan to "roam the world". There are a lot of cheap places all over the world.

But the key word in "never have to work again" is "have". Removing the need to work and only do so when you want to must be a liberating experience.

Next sentence:

>Within two years, they plan to hit this “magic number,” after which they’ll quit their jobs and roam the world.

If you stick to cheap areas like SE Asia and Central Africa then you don't need half of that. Throw in couch surfing or buying a van to live in and you can spend a lot, lot less.

FIRE couples need to ensure that they don't get lonely, and should spend more of their available time cultivating their network as they traipse around the world. For some, it's easy to form and maintain relationships wherever they land, but I find this dimension often missing from the analysis because it's so far into the future.

Yeah I dont see that either, maybe you can retire in Costa rica or something but its still cutting it close.

Especially considering insurance in the US can easily cost over $1000/m for a family.

Well they planned on location arbitrage, non-employer health insurance makes the US pretty expensive.