Case Study: FIRE at 45¶

Interactive Version

Run this case study yourself:

Persona¶

Alex, age 30, software engineer.

Parameter	Value
Current age	30
Retirement age	45
Planning horizon	to 90
Monthly spending	$3,500
Annual savings	$60,000
Current portfolio	$350,000
Allocation	70/30 stocks/bonds

from monteplan.config.defaults import fire_plan
plan = fire_plan()

Key Findings¶

1. The Base Case Is Challenging¶

With constant real spending and default market assumptions (7% stock returns, 3% bonds, 3% inflation), Alex's plan has moderate success. A 45-year retirement (age 45-90) is much longer than the traditional 30-year retirement the "4% rule" was designed for.

2. Spending Is the Biggest Lever¶

A parameter sweep over monthly spending shows a steep relationship:

$2,500/mo: Significantly higher success
$3,500/mo: Moderate success
$4,500/mo: Low success

Even small spending reductions have outsized effects because they compound over 45 years.

3. Retirement Age Matters¶

Delaying retirement from 45 to 48 adds substantial safety margin through:

3 more years of contributions ($180K+)
3 more years of market growth
3 fewer years of withdrawals

4. Adaptive Spending Policies Help¶

For long retirements, guardrails and VPW spending policies outperform constant real spending. They automatically reduce withdrawals in bad markets, preventing the portfolio depletion spiral that kills long-horizon plans.

5. Sequence Risk Is the Key Threat¶

A market crash right before or at the start of retirement is the worst-case scenario. Alex should consider building a 1-2 year cash buffer before the retirement date.

Takeaways¶

Reduce spending first -- it's the most powerful lever
Consider guardrails spending -- adaptive withdrawal rules handle 45-year horizons better
Build flexibility -- ability to adjust spending or work part-time provides a safety net
Test with multiple return models -- MVN, Student-t, and regime switching all tell different stories
Stress test aggressively -- a crash at age 44 is the scenario to plan for