Tag: FIRE

Is the 4% Rule Actually More Like the 4.7% Rule?
Bill Bengen, creator of the 4% Rule, just released a new book with some fun news for all of us saving for retirement.

Bengen’s updated research shows that it’s safe to increase your withdrawal rate in retirement from 4% to 4.7%.

If you are retiring today, it gets even better. Bengen’s research shows that you can safely withdraw around 5.25%.

Bengen’s new book is called A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More.

If you’re at all interested in FIPE (Financial Independence Pivot Early), Bengen’s book is a must read.

What is the significance of raising the safe withdrawal rate from 4% to 4.7%?

If you are years away from retirement, you may be wondering, “Why does it matter if you withdraw 4% or 4.7% in retirement?”

There are two ways to answer that question.

Number 1: the higher the safe withdrawal rate, the more you can safely spend in retirement without running out of money.

That sounds fun.

You know what’s even more fun?

Number 2: the higher the safe withdrawal rate, the less money you need to save before you can retire.

That means you may be even closer to retirement than you previously thought.

That sounds like even more fun, right?

We’ll take a look at the math in a moment.

The title of Bengen’s book says it all: “spend more and enjoy more.”

Here at Think and Talk Money, enjoying our money is one of our primary objectives.

We are not interested in building the biggest bank accounts just so we look good on a spreadsheet. We are interested in building a life where we are in control.

That means spending money on what is important to us. It means spending more time with the people who are important to us.

So, how does a higher safe withdrawal rate help us?

Let’s explore that by first reviewing the 4% Rule

What is the 4% Rule?

The 4% Rule suggests that you can safely withdraw 4% of your investments in year one of retirement. Then, you can safely withdraw 4% plus an adjustment for inflation in subsequent years.

If you do so, you can expect your money to last for 30 years.

Without getting too technical, the 4% Rule is based off of research looking at historical investment gains, inflation, and other variables.

As an example, let’s say you have $1 million in your portfolio.

According to the 4% Rule, you can safely withdraw $40,000 in year one (4% of your portfolio), then 4% adjusted for inflation in each subsequent year, and not run out of money for 30 years.

Using the updated “4.7% Rule”, you can safely withdraw $47,000 in year one.

This simple example shows how you can take your current retirement savings and project the amount you can safely spend so your money lasts 30 years.

Photo by ÁLVARO MENDOZA on Unsplash

The 4% Rule also works in reverse.

By that I mean you can use the 4% Rule to ballpark how much money you’ll need in retirement to maintain your current lifestyle.

We’ll look at exactly how to do that below.

In either case, the 4% Rule is an effective and easy way to start thinking about a magic retirement number.

How to use the 4% Rule based on your current savings.

We mentioned above that the 4% Rule works two ways.

First, you can take your current retirement savings and calculate how much you can safely spend so your money lasts 30 years.

If you have $1 million invested, the 4% Rule says you can safely spend $40,000 annually and expect your money to last 30 years.

Here’s how the math works:

Current Savings x 4% (.04) = Annual Retirement Spending

$1,000,000 x .04 =$40,000.00

Using the 4.7% Rule, the math looks like this:

$1,000,000 x .047 =$47,000.00

That’s a useful calculation, especially if you’re nearing retirement age and just want to know how much you can spend each year.

But, what if you don’t exactly know when you want to retire?

Your main priority may not be to retire by a certain age. Instead, your aim may be to retire with enough money to maintain your current lifestyle. You’re determined to continue working for as long as it takes.

To calculate that magic retirement number, you can once again use the 4% Rule. This time, in reverse.

How to use the 4% Rule based on your current spending habits.

The second way to use the 4% Rule is to start with your current spending habits to project how much money you’ll need to maintain that level of spending in retirement.

This may seem obvious, but to do so, you’ll first need to know your current spending habits.

If you don’t know how much you’re currently spending on a monthly basis, take a look at our budgeting series here.

The good news is that once you’ve created a Budget After Thinking, this next part is easy.

To calculate your magic retirement number based on current spending, simply follow these steps:
1. Add up the amount your’re spending each month in Now Money and Life Money.
2. Take that number and multiply it by 12 to see how much your lifestyle costs per year.
3. Divide that yearly spending by .04
That’s your magic retirement number.

Current Spending / 4% (.04) = Magic Retirement Number

Now, let’s use some real numbers to help illustrate how to use the 4% Rule to project your magic retirement number.

Here’s how to use the 4% Rule to forecast your magic retirement number.

Let’s look at an example using the 4% Rule to forecast your magic retirement number.

Let’s say that you reviewed your Budget After Thinking and learned that you spend $6,000 per month in Now Money and $4,000 per month in Life Money.

Combined, that means your lifestyle costs you $10,000 per month, or $120,000 per year.

To figure out how much you would need in investments to cover your current lifestyle for 30 years, divide $120,000 by .04.

Current Spending / 4% (.04) = Magic Retirement Number

Under the original 4% Rule, that means to maintain your current lifestyle of spending $120,000 per year for 30 years, you would need $3 million in investments.

In other words, your magic retirement number is $3 million.

Photo by Towfiqu barbhuiya on Unsplash

If that number seems impossibly high to you, the updated 4.7% Rule should make you feel a little better:

Current Spending / 4.7% (.047) = Magic Retirement Number

$120,000 / .047 =$2,553,191.49

Based on the updated 4.7% Rule, you now only need $2.5 million instead of $3 million to maintain your current lifestyle in retirement.

That’s fun news.

Use the 4% Rule as an easy projection tool, not an actual withdrawal rate.

Whether you want to use the 4% Rule or the updated 4.7% Rule, keep in mind that these are projection tools.

I view the 4% Rule as a tool to ballpark your magic number, as opposed to a strict withdrawal rate once you actually retire.

I point that out because there’s some debate in the personal finance community as to whether 4% is still a safe withdrawal rate in today’s economic environment.

For our purposes, I’m not too concerned about that debate.

Once you get to retirement, your actual withdrawal rate may be higher or lower than 4% depending on a variety of factors. Put another way, you will need to adjust how much you withdraw each year based on factors outside your control.

Regardless, the 4% Rule is a great way to start thinking about how much you’ll need to save for retirement. Attaching an actual number to your retirement goals is extremely helpful.

Like Bengen argues in A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, the point of saving money now is to spend it and enjoy it later.

For people who are used to saving aggressively during their working years, it can be hard to switch to a spending mindset.

Whether you’re nearing retirement or still have years to go, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More will help you find that balance.

Have you read A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More? What did you think?

Will you update your retirement planning based on the new 4.7% Rule?

Let us know in the comments below.
August 17, 2025
What if You Woke up Tomorrow with $10 Million?

If you woke up tomorrow with $10 million in your bank account, would you do anything differently?

I ask a version of this question whenever I teach my personal finance course to law students. I’ve also asked this question to a lot of my friends and family members.

Whether in class or with friends, this question is a great conversation starter. It’s not so much about the dollar amount as it is about the money mindset that goes along with that amount.

That’s because asking what you would do with $10 million is just another way to ask what you would do with financial freedom.

Attaching a specific dollar amount to the question helps make financial freedom seem real. That’s because it turns the aspirational concept of financial freedom into actual numbers.

With those numbers in mind, you can more realistically think about what your life could look like if you were financially free.

That’s why I love the question. I find it very interesting to talk to people about what they would do with financial freedom.

Why I love talking about financial freedom.

If you hear $10 million in the bank and think of spending it on mansions, boats, and cars… this is not the blog for you.

I want to talk about using that $10 million to buy something way more valuable than material possessions: your freedom.

When you are financially free, you can choose to do work that is meaningful to you without worrying about how much it pays. You can also choose to spend more time with people who are meaningful to you.

I am striving for both of those things on my journey to financial freedom.

By the way, $10 million is just an arbitrary number. Maybe your number is $3 million or $8 million or $15 million. For this conversation, use whatever number represents financial freedom to you.

The amount may differ based on your age, spending habits, debt level, dependents, etc.

The idea is to pick a dollar amount that is high enough that you wouldn’t have to work anymore unless you wanted to. In its simplest form, that’s what financial freedom means.

I’ve found that when I have this conversation, $10 million is a good, round number to get people thinking about what they would do with financial freedom.

So, today we’re going to ask ourselves if we would do anything differently if we woke up with $10 million in the bank.

To help get the wheels turning, let’s start with some simple math to see what having $10 million in the bank really means.

What does $10 million in the bank really mean?

Let’s do some simple math using the 4% Rule to help frame the question.

The 4% Rule suggests that you can safely withdraw 4% of your investments each year and expect your money to last for 30 years.

Without getting too technical, the 4% Rule is based off of research looking at historical investment gains, inflation, and other variables. I view the 4% Rule as a useful tool to ballpark your magic retirement number.

The 4% Rule is a great place for us to start thinking about what you could do with $10 million.

Here’s what the formula looks like using $10 million as our current savings:

Current Savings x 4% (.04) = Annual Retirement Spending

$10,000,000 x .04 =$400,000.00

This means that according to the 4% Rule, you could spend $400,000 annually and expect your money to last 30 years.

This is a useful calculation that puts into perspective how much money $10 million really is. You can essentially view having $10 million in the bank as the same as having a job that pays you $400,000 per year.

The major difference is you don’t have to get out of bed in the morning to receive this $400,000.

Note for simplicity’s sake, we’ll set aside the tax implications of investment income v. W-2 income for this hypothetical.

One other note: if you had $10 million in the bank, you don’t have to spend $400,000 per year. Rather, the 4% Rule suggests you could spend up to that amount and not run out of money for 30 years. If you spend less than 4% each year, your $10 million will last longer.

How much can you spend each month with $10 million in the bank?

To help you picture your life with $10 million in the bank, we can break down that $400,000 annual spending amount even more.

I like to know how much I could safely spend on a monthly basis if I had $10 million in the bank. Knowing the amount I could spend monthly helps make the $10 million more digestible.

That requires just a bit more very simple math:

$400,000 annually / 12 months = $33,333.33

So, if you have $10 million in the bank, you should be able to safely spend about $33,000 per month.

Photo by averie woodard on Unsplash

Now, you can view that number in the context of your Budget After Thinking. You might learn that you’re spending way less than $33,000 per month. Or, you may be spending way more.

Either way, it puts that $10 million into smaller, more digestible numbers.

To recap, we now know that $10 million in the bank means we can spend roughly $33,000 per month and not run out of money for 30 years. The important question then becomes:

Would you make any changes to your current life if you started each month with $33,000 in the bank without having to work?

Let’s explore what your answer may say about your current work situation.

Would you still work your current job if you had $10 million in the bank?

If you had $10 million in the bank, would you continue to work your current job?

If your answer is “Yes,” that’s a great sign that you enjoy your work and the people you work with. You also most likely have motivations for working that go beyond earning money. That’s a really nice position to be in.

By the way, I know a good amount of people in this boat. Even with $10 million, they wouldn’t change a thing about their work situation.

If your answer is “No,” it’s worth thinking about why you wouldn’t keep working your job. Is it the people? The hours? The lack of stimulation? Overall stress?

$10 million in the bank should be enough to leave your job for new pursuits. You can start to ask yourself what you would do for work if you didn’t have to work for money.

I also know a lot of people in this boat. If they had $10 million, they would be out the door tomorrow.

Why am I talking about new pursuits instead of shutting it down completely?

With $10 million in the bank, your initial thought might be to just shut it down completely. For people of a certain age or people with health considerations, that certainly could be the right choice.

Setting those reasons aside, I do not believe in retiring early. I’m convinced that humans are meant to be productive. We are social creatures who at our core want to be contributing.

I think this especially holds true for high achievers who have put in the work and made sacrifices to become financially free in the first place.

That’s why I don’t believe financial independence has to mean retiring. It’s also why I don’t like the popular acronym, FIRE: Financial Independence, Retire Early.

The problem for me is that the FIRE end game is suggested right there in the name: become financially independent so you can retire.

I don’t like what the word “retire” implies.

If you look it up, you’ll see that the word “retire“means to withdraw, to retreat, to recede.

None of those things sound appealing to me at all.

Each word implies moving backwards. I’m not working so hard to achieve financial freedom so I can move backwards in life.

Instead, I like to view my financial freedom journey as FIPE:

Financial Independence, Pivot Early.

I believe in FIPE not FIRE.

When you have financial independence, you have options. You can make decisions based on your core values instead of making decisions based on money. You can pivot, if you want.

One of the ways you can pivot is by taking more control of what you do with your working hours. It’s not about quitting work entirely and wasting away on a beach. As nice as that might sound right now, it will get old fast.

That’s why I believe in FIPE not FIRE.

I encourage you to think about how you might use $10 million to pivot instead of to retire. Could you use that money to buy yourself the freedom to pursue more meaningful work?

So, what would you do with $10 million in the bank?

The point in asking about $10 million is to help you think about your current choices and whether it’s time to make some adjustments.

Having this conversation with your friends and family will teach you a lot about your current situation. Remember, talking about money is not taboo.

In these conversations, pay attention to what you learn about yourself and how you presently spend your time.

Even though $10 million may seem like a distant dream, you don’t need to have that much money to start your own financial freedom journey.

You can start making choices today to put yourself in a better position to pivot, if you so choose.

Maybe you wouldn’t change a single thing about your career choices. Or, maybe you would be out your employer’s door tomorrow.

In the end, thinking about what you could do with $10 million in the bank will help you lead a more intentional life.

So, let us know in the comments below.

What would you do with $10 million in the bank?

June 8, 2025
FIPE not FIRE: Financial Independence, Pivot Early
We focus a lot on financial independence here at Think and Talk Money. That’s because achieving financial independence is the ultimate goal for most of us.

To me, financial independence does not mean retiring.

That’s why I don’t like the popular acronym, FIRE: Financial Independence, Retire Early.

Instead, I I like to view my financial freedom journey as FIPE: Financial Independence, Pivot Early.

Let me explain why I believe in FIPE not FIRE.

FIPE = Financial Independence, Pivot Early

Whatever it is that you truly want to do in life, financial independence makes it possible.

When you have financial independence, you have options. You can make decisions based on your core values instead of making decisions based on money. You can pivot, if necessary.

Financial independence is for people who want to be empowered to take more control of what they do with their working hours.

It’s not about quitting work. It’s about the freedom to pivot to other work, if you want. I’m convinced that humans are meant to be productive. We are social creatures who at our core want to be contributing.

That doesn’t mean we have to be or want to be employees. But, it does mean that we want to do something meaningful with our working hours every week.

That’s why I believe in the power of pivoting, not retiring.

Why I don’t like the name FIRE.

Part of the misconception about financial independence may stem from the name of the popular personal finance concept known as FIRE: Financial Independence, Retire Early.

It’s not uncommon for people to hear financial independence and immediately think that’s only for people who want to quit their jobs and retire. That’s how widespread FIRE has become in the personal finance space.

I agree with so many of the principles of FIRE. I just don’t agree with the name.

Financial independence is about much more than retiring early.

FIRE emphasizes saving more and spending less until you reach the point where your passive investments generate enough income to allow you to quit your job.

I love this part of FIRE: the idea of creating enough income streams so that you have the freedom to do what you want with your time. I share the primary goal of saving more money and spending less to achieve more life freedom.

I call this Parachute Money. I like to view each income stream as a separate parachute string. The more parachute strings you have, the safer it is to make a big change in life.

The problem for me is that the FIRE end game is suggested right there in the name: become financially independent so you can retire.

I don’t like that part. I don’t like what the word “retire” implies.

If you look it up, you’ll see that the word “retire“means to withdraw, to retreat, to recede.

None of those things sound appealing to me at all.

Each word implies moving backwards. I’m not working so hard to achieve financial freedom so I can move backwards in life.

Photo by Benjamin DeYoung on Unsplash

I prefer to think of financial independence in terms of creating options. I prefer to think of financial independence as a way to move forward in life.

I think “pivot” better reflects that mission.

Pivot means to adapt or improve through modifications and adjustments.

That sounds so much more appealing to me.

With FIPE, financial independence is still the primary goal. But, the endgame is not to withdraw or retreat. The endgame is to adapt and improve how you spend your working hours.

FIPE = Financial Independence, Pivot Early.

Granted, the name “FIPE” is not as catchy as FIRE.

But, I think it actually better encapsulates the entire purpose of financial independence in the first place.

To explain, let’s look back at the modern day origin of FIRE for a minute.

Vicki Robin and Joe Dominguez are often credited for laying the groundwork for the modern day FIRE movement. Robin and Dominguez wrote an incredible book called Your Money or Your Life.

It’s one of my favorite personal finance books. You should definitely read it if financial independence is important to you.

In their book, Robin and Dominguez have a lot to say about the relationship between money, work, and time.

Guess what?

Most of us are doing it all wrong.

Most of us make the mistake of chasing money at the cost of our precious time. When you read Your Money or Your Life, you will start to value your time for what it’s really worth.

By making good choices about how to earn money- and as importantly what to do with that money- you can get the most out of your money and your life.

That’s what FIRE is really all about. It’s about choosing to use your working hours in a way that is more meaningful to you than clocking in-and-out as an employee each day.

It’s not about retiring from meaningful work. It’s about pivoting to work that is more meaningful to you.

FIRE proponents would likely agree that the goal is not to withdraw or retreat.

I think proponents of FIRE would actually agree with me that the end game is really not about withdrawing or retreating. The mission is always about moving forward, not backwards.

My belief is that people who are disciplined and skilled enough to reach financial independence in the first place are the type of people who don’t retreat or withdraw.

They may opt for periods of temporary retirement, as they should. But, I don’t think financially independent people are truly wired for full-time retirement.

That’s why you see so many people who have obtained financial independence continue to pursue income streams.

That might mean managing real estate investments, teaching others, or even starting a financial freedom blog.

So, technically speaking, most people who have obtained financial independence have not actually retired. They haven’t withdrawn or retreated. Instead, they have pivoted.

They are now spending their working hours doing other things. They may not be working full-time for an employer, but they’re still working.

They’ve achieved financial independence and have earned the right to pivot.

Financial Independence, Pivot Early.

Even FIRE leaders would likely agree that the end game is not to completely retire.

FIRE is not about retiring or quitting. It’s about pivoting to more meaningful life pursuits.

I don’t want to speak for Robin, but I think this is what she was getting at.

I also think this is what modern day FIRE leaders like Mr. Money Mustache and the Financial Samurai believe in. Not long ago, Financial Samurai actually wrote an excellent post called “Why Early Retirement / FIRE is Becoming Obsolete.”

I just think the name FIRE doesn’t accurately portray the mission. Pivoting early seems more appropriate to me than retiring early.

We all have the same goals in mind: financial independence. And, I believe we have the same end game in mind: pivoting to more meaningful work.

That’s why I like FIPE instead of FIRE.

Are you looking to retire early or simply to pivot?

What is it that you’re aiming for by getting your personal finances in order? If you want to retire early, there’s nothing at all wrong with that. You may be at the point in your career and life where that makes sense.

Personally, I’m not looking to retire early. That’s why I like to view financial independence as a chance to pivot.

Pivoting doesn’t mean you have to switch jobs or change things up just for the sake of change. It just means that you have that option if you want it or need it.

By the way, I’m not alone in viewing financial independence as a chance to pivot instead of retire.

Scott Trench, CEO and President of BiggerPockets has been beating this drum for a while. He’s also talked about it on the BiggerPockets Money podcast.

I’m in complete alignment with Trench. I like almost everything about FIRE, just not what the name implies.

With FIPE, the goal is not to retire. The goal is to give yourself the freedom to choose what to do next.

Whether you want to retire early or just pivot to a new chapter in your life, being good with money is key.

Do you like the name FIRE or FIPE?

At the end of the day, whether you like to view it as FIRE or FIPE, the mission is the same. We are all looking for the freedom to choose what to do next.

When striving for financial independence, the goal is to create options. Those options likely include pivoting to more meaningful work, rather than withdrawing or retreating.

Personally, I think the name FIPE better encapsulates that mission.
- Do you agree?
- What name resonates more with you on your financial freedom journey?
- Are you interested in retiring early or pivoting early?
Let us know in the comments below.
April 16, 2025