About 3 years ago, we set a goal to be Financial Independent and Retiring Early, but the world has changed a lot in the past 2 years, including the economy.
Our existing FIRE goal is $650,000 for us by 2028, with the 4% rule, that is about $26,000 per year or $2,166 per month, to spend. The standard 4% rule states that you could withdraw around 4% of your savings/investments every year to cover your expenses without worrying about running out of money.
Based on the US Bureau of Labor Statistics, the Consumer Price Index (CPI) has gone up about 11% from 2021 to 2023 (an annual average of 5.2%). Realistically, we need to increase our FIRE goal in order to match the current state of the economy.
However, the CPI is just the average economic index – to put our daily expenses under a microscope, the cost of groceries has gone up over 20%, and even if you don’t leave your house, electricity and piped gas are also up 21% and 26% respectively. (source: https://www.cnbc.com/2023/04/14/charts-how-much-inflation-increased-since-2021.html)
Earlier this year, we were priced out our apartment of 3 years. We were paying $1,700 per month when we received the lease renewal option of $2,100. 🙁
Although we are both making higher salaries than we did in 2021, our lifestyle and savings remain the same, if not, tighter than it was in 2021 because of inflation.
Despites the economy being basically underwater, our financial status remains optimistic – we currently have $128,000 in various investment portfolios (taxables, Roth IRAs, and Traditional IRAs) and $59,000 in savings. This totaled up to $187,000/$650,000, or 28.8% of our FIRE goal. If we adjust the goal for the inflation, then it would be around 26%.
Realistically, we are on track to at least achieve the FI- part of FIRE by 2028 (as we are aiming for a LeanFIRE).
The last 2 years were crazy and unprecedented for the economy across all markets. We hope that inflation has peaked and will soon return to a stable and manageable level.
The exponential growth in our portfolio I was looking to was simply a gentle slope. And at this rate, we may only achieve 75% of our FIRE goal by 2028. (We reached $100k in 2022, soon will reach $200k in early 2024, hopefully $300k in late 2025, $400k in 2027, and $450k in 2028).
$450,000 is a decent size asset in 2023, and we hope it will remain a decent monetary value in 2028 as well.
Thanks for the update!