BiggerPockets Money Podcast - Your FIRE Number Is Probably Wrong — Here’s Why

Episode Date: May 8, 2026

In this episode of the BiggerPockets Money podcast, hosts Mindy Jensen and Scott Trench break down the biggest mistakes people make when calculating their FIRE number and planning for financial independence. Many early retirement calculators rely on simplified assumptions like the 4% rule or current spending levels, but real-life retirement planning is far more complicated. This episode covers how healthcare costs, inflation, one-time expenses, and changing lifestyle spending can dramatically impact your true FI number and long-term retirement success. We also discuss safe withdrawal rates, stress testing your retirement plan flexible income streams, and why many FIRE investors underestimate future spending during early retirement. Whether you’re pursuing FIRE, early retirement, Coast FIRE, or traditional financial independence, this episode will help you build a more realistic retirement strategy and avoid common mistakes that can derail long-term wealth and portfolio sustainability. To go beyond the podcast: Kick start your financial independence journey with our FREE financial resources - https://biggerpocketsmoney.com/ Subscribe on YouTube for even more content- www.youtube.com/biggerpocketsmoney  Connect with us on social media to join the other BiggerPockets Money listeners - https://www.facebook.com/groups/BPMoney We believe financial independence is attainable for anyone no matter when or where you’re starting. Let’s get your financial house in order! Learn more about your ad choices. Visit megaphone.fm/adchoices

Everybody in the FI community has the same question, what is my FI number? But the biggest risk is not failing to meet your FI number. It's spending 10, 15, 20 years pursuing a FI number that's incorrect. Today, we are breaking down the six biggest mistakes people make when calculating how much money they will need in early retirement. Why the standard Internet formulas can be dangerously incomplete and how to build a FIRE number that works in real life, not to be a FIrower. just on a spreadsheet. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen, and with me as always is my knows his five number co-host, Scott Trench. Thanks, Mindy, great to be here and excited to spend some time with you talking about this important subject.

And yeah, your fine number is one of the most important things you need to have dialed in to work toward financial independence. And today we're going to be talking about the biggest mistakes that you need to avoid in computing that number. Mindy, do you want to kick us off with the first one? Okay, the first mistake is using your current expenses and your current income rather than your retirement expenses. Scott, if you took your current expenses and said, well, this is how much I'm going to need in retirement, you are going to have incorrect numbers because you are paying for child care right now. Are you going to be paying for child care in five years? Nope. Nope. So that's a number that's going to go off. If you

look at your actual expenses, there's lots of expenses that are going to fall off. But on the other hand, Scott, might you travel a little bit more when you retire? I hope so. So then those expenses are going to go up. There are expenses that are going to be very different once you're retired. So think about what you want your desired retirement to be like if you're going to be traveling a lot or, hey, Scott, do you have any hobbies that you haven't had a chance to do and want to do and might cost money? And these are a lot of questions from me, but yes. I'm throwing them all at you, Scott, but I'm also throwing them at our listeners. First of all, do you even know what your expenses are?

Every single expense, because when you think, oh, I spend about $40,000 a year or $60,000 year, let's be more realistic, are you going to be spending $60,000 in retirement? If so, then yes, that's the right number. But you really need to have your expenses dialed in in order to know what you're going to be spending when you're retired. I mean, making up numbers, what's the point of even having a fine number? Yeah, I agree. I think that the average American is so shockingly and appallingly underdeveloped in their financial literacy toolkit that they need these rules of thumb in financial planning like, oh, you're going to replace 80% of your income, your current income in retirement. That's how we're going to plan for your retirement number. It's crazy. It's a random number that has no meaning. Your retirement portfolio needs to cover your expenses. This is an obvious point that everyone should be able to grasp here. The challenge, though, is that what are those expenses going to be? What are they going to be over the next few years? And what are they going to be at retirement?

And there's a lot of complexity that goes into that. And most withdrawal rules of thumb, like the 4% rule, assume a very constant inflation-adjusted spending target because they have to. What else are they going to assume? They're going to map out your particular life's journey of expenses? No, only you can do that, and you've got to figure that out. So the biggest mistake is if you go to some generic financial planner, you might hear, or some financial planning resource, you might hear, oh, replace some percentage of your

income or all of your income. Obviously incorrect. Big mistake. Scott, your income. Income includes most likely the amount of money that you're putting away for retirement. Once you're retired, you're not putting any more money away. That's a huge chunk that you don't need to replace anymore. Your expenses around going to work go away.

There's just, there's lots of things. What I want our listeners to take away from the first mistake is to start tracking their expenses. Really, really track them granularly to see what money is actually going out and where it's going. Because they're going to change a lot in retirement. What I do for this is every week, I go through and I review every transaction. This is not a very cumbersome process, although it is cumbersome to set it up initially, potentially, depending on how many accounts you have and where you know, where your spending comes from, whether it's from a bank account or various credit cards.

But we use Monarch. That's monarch.com. Use the code pockets for 50% off your first year. If you're a bigger pockets money listener. Monarch is a awesome tool for this. And I can go through all of my transactions on every credit card, see who has spent the money, what it was on and asked my wife in our weekly meeting about any transactions that I'm not sure about. So it's literally five to ten minutes and it makes a huge difference.

And then of course I can get very detailed statements about spending in the past month, the past year, by month, by week, any type of breakdown that I want. So that's the powerful tool and that drastically increases the odds of accurately forecasting expenses in any future period. Yep, absolutely, Scott. Carl and I use Monarch too. and it is so easy to hop onto the site and just look at what's going on. The way that I have set up my dashboard and you can customize it however you want.

But the way I've set mine up is that in the upper right is where my spending is. So I can pop on and look there. Oh, you know what? It's halfway through the month. That looks about normal. Or hey, it's a little bit off. Let me go, let me dive deeper into it. So when you're keeping track of it all the time, it becomes second nature to just pop on and look at it.

Yeah. One more really good tool is to. combine this with AI. Monarch has an embedded AI, but you can also just export all your transactions into a CSV, and I've done this, and all of your accounts, upload it into plot or chat GPT or whatever your favorite AI is, and then ask it to analyze your spend, normalize any one-timers, and give you an idea of what your spend ought to be or how it compares to other people in your household category. So I've done this and spent hours of happy times going down that rabbit hole with the AI. So pretty big improvements. Are there any areas to

make changes. Oh, your insurance. Let's talk about that. Here's what good looks like. It's pretty incredible how much a valuable dataset like that, which you're building in Monarch, or whatever, wherever you track your net worth is worth when you actually upload it to a smart AI. Wow. I have not gone that deep yet, Scott, I guess I'm going to have to catch up. Yeah, many happy hours, like I mentioned. So, Mindy, what is the second big mistake for early retirees and spending? Scott, I'm going to say treating the 4% rule like it's gospel, like it's written and stone instead of treating it like a rule of thumb. Everybody always leaves off the of thumb. The 4% rule is awesome. Way back in 1994, Bill Bagan was a financial planner and his clients kept asking him,

what is this safe withdrawal rate? So he did the math and he said 4%. Actually, it was like 4.12 or something like that. And it's been downgraded to 4%. There are a lot of differing opinions because his research was based on a 30-year time horizon. People are saying, well, because I'm an early retiree, I need to withdraw less. I need to withdraw three to three and a half percent just to make sure I have enough for my longer horizon. That math makes sense, but you might not need to go that low. Bingen has since expanded his research, and now it's closer to a 5 percent withdrawal rate as being safe. There's people in the space like Aubrey Williams, we've had him on our show, who suggest you set up draw down guardrails.

I love his idea of the guardrails. You don't change your spending even if your portfolio goes up. You don't change your spending even if your portfolio goes down, something like 40%. If you have a drop in your portfolio of 40%, he's suggesting that you don't change your spending. There's lots of different ways to do this research. There's lots of different rules of thumb that people are coming out there with,

But just hearing, oh, 4% rule, I can withdraw 4% and stopping right there, I think, is not doing yourself any favors. Yep. One of the big things with the 4% rule beyond the endless quibbles that really smart people seem to have with the core premise, right? You know, there's Bill Bingen's research. There's Karsten Jeske, who is arguably done even the most rigorous research in, you know, analyzing the 4% role with, you know, valuation tilts and those kinds of things.

There's work from Michael Kitsis. There's work from Aubrey Williams. there's so many people that are that are talking about this, and there's a range that's developed, right? On the low end of the conservative range, you've got things as low as three to three and a quarter percent safe withdrawal rates for early retirees. And on the higher end of that range, you can start bumping against five percent safe withdrawal rates or 30-year retirements. And so it just depends on who you want to follow and what you want to believe there. I would argue that the best analyst or one of the best analysts in the space right now is Karsden Jeski for early retirees.

And I think his work on safe withdrawal rates is something you should check out at early retirement now. If you're looking for the most rigorous defense of that in the context of the current environment with very high Schiller PE or very high stock market valuations, for example. So I think Carson's got a really great grip on the problem, although plenty of smart people would disagree with him and take issue with some of his findings there. The big problem with all of this research, though, is that the 4% rule assumes that you're going to spend statically relative to inflation. right if you're going to have a withdrawal 4% of a two and a half million dollar portfolio it assumes that you're going to spend $100,000 per year adjusted for inflation forever and that is not going to be your reality it's not what we see in practice and that is where the 4% rule breaks down and these guys who direct tremendous amounts of brain power to analyzing safe withdrawal rates can't do anything

other than assume static inflation adjusted spending so that's the part that we should cover next here is what is your spending going to look like in retirement? And that changes how we think about the 4% role. Your business identity is everything that makes your business legitimate and professional. From public records and compliance to your website, email, and phone number. With Northwest registered agent, you don't just form a business. You start a complete foundation built for privacy, credibility, and growth. When you form your business with Northwest, you get a complete business identity,

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When the change in season hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized, and that's great. If that's you or if it's not you, either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. Another feature I love about Monarch is the weekly AI recap.

It catches spending spikes before they become problems. flags big net worth shifts or upcoming expenses. It's like having a quick personal check-in every week, so nothing sneaks up on me. Get your first year of Monarch for half off, just 50 bucks, with the promo code Pockets. Use the code Pockets at Monarch.com to get your first year half off at just $50. That's 50% off your first year at Monarch.com with the code Pockets. There's a version of financial success where you've done everything right and still feel like you're figuring it out alone. The peers who could actually help you aren't easy to find, and most communities built for that stage aren't really built for that stage.

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Membership is free for those who qualify. Apply at longangle.com slash money. That's long angle.com slash money. Okay, Scott, that brings us to the third mistake people make when they are calculating their fine number. What is one of the biggest expenses that's going to change, Scott? Healthcare. Yep.

The 4% rule already accounts for inflation adjusted spending. It covers, inflation covers everything in the basket of goods and services. you're going to buy, but health care is different than the rest of your spending because it rises separately from inflation. As a 35-year-old, if I get a health insurance policy quote right now, I'm going to get a much lower price for my family's health insurance than if I just change my age today to 60. That's not inflation. That's the law enabling insurance carriers to charge older people higher premiums for the same health insurance today. That is, I know. I know. know that even before I factor in inflation in healthcare, I'm going to see my health insurance

premiums rise, and I probably, if I'm smart, should also assume that I'm going to spend more and more out of pocket each year as I age, and that's, you know, age is number one correlate to health care expenses. So you have to model this in. For someone like me, it's like adding another $200 to $250,000 on top of my fire number to account for the structural rise in health care costs I'm going to experience over the next couple of years. If I want to spend $85,000 a year on everything but health care and my health insurance premiums are $15,000, then I need something more than $2.5 million

to cover that rise in health care costs from $15 to literally $30,000, $35,000 by the time I hit age 64, 65. After 65, I go on Medicare and my health care costs drop, so it's just a bridge. It's not a permanent increase in spending, but it is a rise every year through traditional retirement age. That's the biggest mistake people make with health care, and it's particularly a killer to the lean-fi crowd who may not be able to absorb the costs of those rising health insurance premiums,

the same way that somebody with a traditional or chubby fire number might. Scott, another thing that early retirees make a mistake on is assuming that the subsidies that they are taking now will continue in perpetuity. I think that that is a very dangerous thing to assume. We have been writing checks as a government for a long time. and something has to change. Somebody's going to have to pay that back eventually. And I believe that the subsidies, they've already given them a cliff. I also believe that subsidies are going to, in the future, have a net worth component. Oh, your net worth is X, then you can't receive any subsidies. And that's going to affect a lot of the early retirees. Or subsidies could just go away completely.

I don't think that's going to happen, but I think that that cliff could get sharper. I think that There's a lot of uncertainty around subsidies. So if you are planning on your retirement being subsidized by the government for the health care, you could be making a very big mistake. Yeah. The Affordable Care Act subsidies are designed for households making some multiple of the federal poverty line. These are poverty line subsidies. And the American taxpayer may at some point decide that they're not willing to subsidize the early retirement of a millionaire for their health insurance.

Now, people get upset about this. Oh, I've paid my taxes over time and I deserve the subsidies. Fine. Fine. I'm not saying don't take the subsidies. I'm saying your plan should not depend on you being subsidized across a 30-year early retirement. If it does, that's a bad plan.

Take the subsidies while they're available, but know that you're at risk of having to pay those premiums in some form or other at some point in your early retirement. And if your plan can't handle that, your plan can blow up. Real risk. Yep, absolutely. Mindy, what's the fourth mistake people make? Ooh, the fourth mistake is leaving out the big expenses, the one-time expenses. Hey, Scott, do you have two daughters?

I do. And traditionally, does the daughter's family pay for the wedding? Yep. Are you planning on paying for your daughter's weddings? I think, yes, I am planning on paying for my daughter's weddings. And yes, they're probably going to be pretty nice, given that, you know, given the size of the Disney princess dress collection. that is already progressing in our household.

Hey, are they going to go to college maybe? Would you pay for that too? There's big things that are coming up down the road. Your daughters are three and one. So weddings in college aren't in your mind right now. If they're not part of your current situation, it's real easy for those to just get forgotten about. I know you have a beautiful house,

but something's going to break. Sorry to burst your bubble. Something is going to break in your house. and you're going to need to pay for that. And a roof, in Colorado, a roof costs $12 to $15,000 if you're paying for it out of pocket and like $30,000 or $40,000 if your insurance company is paying for it. There's also HVAC systems. That's going to be about $12,000 to replace the whole thing. There's appliances, water heaters. Your house has a lot of things that are going to break. I promise you everything in your house is going to break at some point, depending on how long you own the

house. So you're going to need a budget for those repairs too. Caring for your parents. There's all sorts of big expenses. Having an extra little bucket of big expense money, maybe you fund this as you are going and you're having a bunch of really up years. You're like, oh, I'll just siphon off a little bit more and put it in my big expense bucket. Or maybe you make a big expense bucket that you continue to replenish as these big expenses come up. You know, when I was earning a very high income as CEO of Bigger Pockets, I didn't have time to really shop many of these things, and I had to make quick decisions with a reliable contractor, basically. Now, I can take care of large chunks of these projects or rigorously shop each one of these areas, right? I can make much higher quality decisions

and spend time to reduce those costs pretty meaningfully. So that's a real offset to some of these life capital expenditures, if you will, or the big expenses that come up in frequently. On the other hand, they're real expenses and you have to account for them. And I think that some people take projections of their best case spending, which is obviously irresponsible and don't factor in a very nice margin or buffer every month or every year for these types of things. And if you know certain big ones are coming up and you're not prepared for them, they can catch you by surprise. Personally, I'm choosing to consider my fire number, you know, inclusive of having to fund college, a full, you know, pretty expensive college education,

for my two kids. Many people choose not to go that far or not to fund any college for their children at all. That's a personal choice, though. But you have to make a decision about each one of these big expenses and where you want to end up. And I think for me, it's, I want to cover college. And I'm probably going to cover, you know, I'm planning tentatively on covering some nice weddings if my two, my two daughters choose to get married. Yep. And it's just, it's a choice. All of these options are choices. All of these mistakes are things that you might not be thinking about. when you're calculating your fine number, which is why we're bringing it up. You don't have to pay for your weddings of your children. You don't have to pay for college. But why are you saving all this

money and then not going to help out your kids too? If you have kids. Not everybody has kids. Mind, you have a quick question on a side tangent here. Which season of life do you think that people want to spend the most money in? You know, like it wasn't 23 for me. It's certainly, I'm certainly grateful to be able to spend more money now at 35 with two kids. Well, I want to have peak spending now or what I want to have it when they're in high school after they graduate? What do you think about that? Oh, that's a really good question, Scott. I'm almost thinking because it's the season of life I'm in right now is when my kids are in high school and college. So I'm 53. I have one kid freshman year in college and the other kid is a sophomore in high school.

I want to take trips with them now that it's enjoyable to take trips with them. When they're three and one, there's a lot of nap times. There's a lot of like their routine gets messed up and they don't have the ability to go with the flow. They're just little and they're used to, I don't know, have you ever had a meltdown on a vacation? Yes. We did a whole analysis of the trip to Breckenridge and the, you know, tier to dollar ratio, which is extremely high versus trip to local library water fountain, which was free, full of giggles, everyone got nap time in.

There was no altitude sickness, all of those types of things. Yeah. So now in my 50s is. my big spending season. And I think that after Daphne graduates high school and goes off to college, that'll be an even bigger spending season because Carl and I are going to incorporate some travel into our lives that, you know, that doesn't include the girls. It's fun to travel with the girls. It's also fun to travel just the two of us. So I think like late 40s to early 60s is probably a really great big spending time. That's really interesting. And I would, I would have hypothesized

that right now would be my peak spending because of child care costs with the two little ones. And like that would dwarf the travel, but that could be completely wrong. And so I think that that's where people need to make decisions about all of this stuff and say, where am I right now? Like certainly I'm so glad to be able to spend more now at 35 than I did at 23. I didn't need to spend much at 23 to have a really good life and be very happy with my situation. Now that really is valuable to be able to have child care for our two little ones, to be able to pursue this and and other interests that we have. I didn't think about the cost of travel, you know, with two girls in my 40s or maybe early

50s, but that could be a pretty big expense that I want to be planning for, maybe as big or exceeding the child care budget. Although, I will say that that feels more discretionary than the child care expense right now. Yeah, and when you asked me this question, I was thinking about stuff I want to spend money on. You might appreciate the money that you're spending for child care, but that's not like, Yay, I get to write another check to childcare, as opposed to, yay, I get to go on another trip and it's going to cost money and I'm okay with that. That's what I was thinking of more like discretionary spending.

I'm super excited to spend discretionarily. I still make my mortgage payments, but that's not exciting. Your business identity is everything that makes your business legitimate and professional, from public records and compliance to your website, email, and phone number. With Northwest Registered Agent, you don't just form a business. You start with a complete foundation built for privacy, credibility, and growth. Northwest makes life easy for business owners. They don't just help you form your business. They give you all the free tools you need after you form, like operating agreements, meeting minutes, and thousands of guides that explains all the ins and outs of running a business.

Don't pay hundreds or thousands of dollars for what you can get from Northwest for free. Visit Northwest Registeredagent.com slash money free and start using free resources to build something amazing. Get more with Northwest Registered Agent at Northwest Registeredagent.com. When the change in season hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized, and that's great. If that's you or if it's not you, either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins, just accounts, investments, property, and more all in one place. Another feature I love about Monarch

is the weekly AI recap. It catches spending spikes before they, become problems and flags big net worth shifts or upcoming expenses. It's like having a quick personal check-in every week, so nothing sneaks up on me. Get your first year of Monarch for half off, just 50 bucks with the promo code pockets. Use the code pockets at monarch.com to get your first year half off at just $50. That's 50% off your first year at monarch.com with the code pockets, P-O-C-K-E-T-S. The further you get along financially, the more you realize how rare it is to find people who are both at your level and asking the right questions. Dan and his son Adam noticed something unique about Long Angle. The people here all seem to be curious and interested in others. That's hard to

find in people who are successful. I started for the financial angle, but the non-financial pieces, whether it's relationships, trips, family, wellness, that's brought me a lot of value. Long Angle is a vetted community of 8,000 or more entrepreneurs, executives, and investors who came for the financial conversations and stayed for everything else. Membership is free for those who, qualify apply at longangle.com slash money that's longangle.com slash money all right Scott what is our fifth mistake that people make when they are calculating their fine number I think it's it's this concept of not stress testing your fine number or keeping it all purely academic for the entirety of the time leading up to your retirement and never actually putting hard numbers to it right not actually

beginning to sell portions of a portfolio we had a gentleman named Frank Vasquez on the show in the summer of 2025. And he had a great simple tip for this, which is take $10,000 out of your portfolio and put it into your retirement or decumulation portfolio and begin selling it off and harvesting it, even if it's just for lunch or dinner once a month in order to really build that muscle of decumulation or spending your portfolio. So it's not totally academic for you heading into retirement. We did a poll on Bigger Pockets Money a while back.

and some 80% of the people who watch or listen to Bigger Pockets money have never sold any equity or stock, you know, no stocks, no assets whatsoever to fund consumption in their lives. And so that's a, that's a challenge. It's a big mental hurdle to get over, even if you, you know, are very proficient in the theory when it's time to begin approaching your FI number. What do you think, Mindy? I think one of the best examples of this stress testing your FI number was from Christy and Bryce way back on episode 55 and episode 55 and a half. So a little over halfway through

the recording of episode 55, Bryce casually says, we had three years of runway before we actually pulled the trigger. And I'm like, well, what do you mean by that? He said, oh, we had our portfolio and we tested living off of our portfolio only for three years while we were still working. So they had this safety net so they could stress test it. They put all their money, all their income someplace else and just lived off the portfolio. And they saw that it worked great. They've now been retired for more than 10 years. And they do earn income.

They've got a book and a podcast and a website and all of this. But they put all of their income in a different bucket. And they live solely off of the portfolio that they planned. And in 10 years, they have withdrawn 4% every single year. they have more money now than they had 10 years ago when they started after taking the the 4% out every single year not including all the extra income that's in a separate bucket they wanted to see if they could do it off of the 4% rule and it's been working for them also throw in one last thing here on this stress testing component which is the lower your fixed expenses are the easier

everything else gets with fire right because you know a paid off mortgage or paid off cars low insurance costs that you've shopped, right? A very strong baseline food expense for what you're eating, you know, solid whatever gym or infrastructure, solid fund that's kind of your go-to. If you can keep those expenses low, your discretionary spending number can be very, very high in financial independence and most of that can be flexible. And I think that's a pretty big mistake people make as they come in to FI with huge fixed expenses thinking they're going to arbitrage, you know, their mortgage rate or the car loans or whatever with the stock market returns, but that can make a pretty big dent if you're close to your FI number

on what you can actually spend discretionarily. Yes. All right, let's talk about the last mistake. Okay, Scott, the last mistake that most people make is underestimating that they'll never make income again. It is a very romantic notion to say to yourself, I am going to quit my job and I am never going back. Who do you know that doesn't generate some form of income even after they have quit their formal employment. We know from our polling data of the bigger pockets money audience, a third of you are intending to start a business or go into some kind of self-employment work when you become financially independent. Another third of you are open to it, and a third of you definitely don't want to earn any additional income. And I think that for that third,

that definitely don't want to earn any additional income, I love the, I'm not planning on earning an additional income. My plan is robust enough to survive without it. But I think it's a mistake to lock yourself into this identity of never earning another dollar again and make it some kind of academic, you know, purity test to do that in your financial independence. Be open to it. That totally softens the constraints on the 4% rule of the risk factors we've talked about previously here. And you may find that you want to spend a little bit extra money here and there if it's very easy to pick up a couple of briefcases full of money that are just off the beaten path of your otherwise envisioned early retirement. So I think that maybe that's even a broader mistake. I'll

out here, which is this identity that people form on the pursuit of fire, that they're frugal or that they're never going to work again in there. And that can be a handicap or crutch for you in your early retirement and that we spent a lot of time unpacking here on the Bigger Pockets Money podcast. Yeah, I think that there's a lot of money that gets made by accident. I think that people have this idea, oh, I'm never going to work again. My friend, Eric, was never going to work again. He retired. He's got enough money. He's fine. But then his friend, who has a his own company said, hey, I've got this interesting problem. And Eric said, you know what? That sounds interesting. I would like to come back and work with you and help you solve this problem.

And he worked there for a while and then he left. He hadn't planned to make more money, but he just did. I think that's going to happen a lot for for people in this space because they'll find an interesting problem. People who are able to solve the problem of financial independence and early retirement are going to be problem solvers that other people will come to. I can think of one person, Darren and Jolene, and Jolene has a wine blog. I think she makes $400 a year. So, you know, really raking it in. And I don't count that as income, even though it is technically income. $400 a year is not going to do anything for their life. It'll buy gas to get to my house. that's about it. Otherwise, everybody I know who has retired early has some form of significant income that they have generated. Maybe they've made enough money to pay for their expenses the whole year. Or maybe they've made enough money to travel extensively. They're not generating a ton of income, but they're generating enough that it's significant, that it makes a dent in their needed fine number.

Yeah, and even a small amount of ordinary earned income does an enormous amount of work offsetting the risks that are known in the 4% rule or other withdrawal ratios. It can bump up your safe withdrawal rate or, you know, dramatically increase the certainty of never running out of money in early retirement. So it's a very powerful tool. It does not have to be, you know, some sort of, you know, conditional thing for retirement, but just being open to it and, you know, thinking about it after the first six months or year or two of early retirement can really make a dent and be helpful.

Mindy, I'll exit us on one, what I think a lot of people in the fire community do right component, which is after leaving full-time work, we see a huge percentage or a significant percentage of people in the fire community get very fit. Have you noticed this? I have noticed this. You don't really have time to work out when you're working a full-time job. But once you stop working the full-time job, that becomes kind of your priority. I like to work out in the mornings.

I don't want to work out in the afternoon that I got to think about it all day. But in the morning, I get up, I go to the gym. It's awesome. Like, my class starts at 7.30. When I was working at bigger pockets and had to be in the office at 7 o'clock or 8 o'clock or 9 o'clock or whenever, I can't go to the gym at 7.30. And I don't want to get up early enough to go to the gym at 5.30. I would argue that I don't know if the fire community does this intentionally or not, but I think

it feels good. But it also increases lifespan, increases health span, reduces the, reduces. reduces the risk of needing to use that health insurance item there and makes your brain function better. So when those opportunities to make money come about, you might be able to harvest them pretty efficiently in an ad hoc basis. So I think that that's absolutely one of the best things that a lot of people in the fire community seem to do when they actually pull the trigger and fire. And I think that that's something that we collectively should continue to do. It's such a powerful benefit. Yes, absolutely. What is the point of being early retired if you are not

not healthy enough to go enjoy it. And it gives you so many options if things begin to go poorly in the market. Okay, Scott, your fine number is going to evolve over time. But thinking about all of these aspects of early retirement and these mistakes that we have shared before you get to retirement, start thinking about that now. That'll help shape your actual fine number, not your on paper 4% rule fine number. Yep. Let's wrap it up and put a pin in it. Right. So the mistakes are, one, not using your fire number to project your expenses in retirement and using some arbitrary rule of replacing some component of your income while you're in your active years. Those are opposites. They don't make me sense. The second is understanding that the 4% rule is a rule of thumb based on

static inflation adjusted spending and your spending may be different from that. It will almost certainly be different from that baseline with respect to health care specifically and you may have other big ones like home repairs, weddings, college expenses, or elder care coming up in your situation. Only you know that, you must project those defensively as you move into your financial independence journey. The next one is not stress testing your fine number, making it all academic leading up to this turning point where you go from earning lots of active income to earning none. That's a big mistake. It's a psychological battle that many people defer for years because they don't have to put in place the system to do that ahead of time. And the biggest

remedy or the best remedy is perhaps creating a small chunk of your portfolio that is your decumulation portfolio and practicing that skill of decumulation and spending leading up to your fire. And the last mistake is shutting the door entirely to earning active income in your early retirement. Almost two-thirds of the bigger pockets money community are at least open to that idea. And I think that drastically increases your options. And to me, fire is about options. People who are very rigid in their interpretation of fire and treat it as some kind of moral purity test to be very frugal or live exactly on the 4% rule without earning any active income, I think you're missing the point of what we're trying to do here. And I think that some

active income is almost certain to come into your life if you are even open to it at all over the course of an early retirement. Yeah, you're going to get a lot of opportunities, and you might want to take one of those opportunities. So don't assume that you're never going to generate any more income. Just don't go back to work full time, right? Unless it's really interesting. Fair enough. And then number one thing you can do right is get fit. Yes. Focus on your health. All right, Scott, this was super fun. And listeners, if we missed a mistake that you have discovered on your journey to five, please let us know. Share it in the comments below or email Mindy at biggerpocketsmoney.com or Scott at biggerpocketsmoney.com. We want to make sure that we're

sharing all of the information that everybody else knows this, this collective mindset of reaching five. Let's all do it together. If you would like more financial independence information, you can hop on over to BiggerPocketsmoney.com. Sign up for our newsletter. Check out our resources page. One thing that Scott spends hours doing is creating new resources on our resources page. Calculators, templates to accelerate your FI journey. He's been real busy. Check it out at biggerpocketsmoney.com and BiggerPocketsmoney.com slash resources. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Mindy Jensen saying, When you're ready to start your business, Northwest registered agent helps you do more than just file paperwork.

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