What a Market Meltdown Could Do to My Portfolio

Now that we’ve explored some risks associated with early retiring during financial crisis in Part 1, let’s actually see how the number will look like!

I created a FIRE Stress Test Calculator using excel spreadsheet.

This calculator will simulate your account balance and your withdrawal assuming that you retire right before the financial crisis of 2008.

I enter my variables in the dashboard

Since I am planning to retire in 3 years and expecting my financial asset to be at $1.2M by then, I plug that number in as the starting portfolio. I am not planning to withdraw more than I need, so rather than fixed percentage withdraw, I set a desired annual spending amount in today’s dollar amount. This amount will increase yearly based on the inflation rate you set at.

I have a pre-populated historical data set of S&P 500 annual return rate. The future year rates will fallback to the default return rate that I initially configured. Let’s see what my end portfolio looks like!

Simulation Results!

As you can see from the table, if I start retiring at 35 with $1.2M in stocks, I can constantly withdraw my desired spending amount every year without ever depleting my account. However, at the beginning of my 4th year, my portfolio has a balance of $843.8K. This is a significant decrease from my original starting portfolio of $1.2M, and I might be very uncomfortable withdrawing from my account around this time. Although the return rate rebounds and I will eventually see surplus, I would only retroactively know that.

But knowing that my $1.2M would have endured the worst financial crisis since the Great Depression is very reassuring.

Are you also curious to find out if your asset can survive another recession? Or do you want to make an informed decision rather than panic-selling when you see a huge depreciation of your asset?

If so, try out the FIRE Stress Test Calculator! You can download it at my store on Payhip:

I will continue to develop and share some useful tools, so make sure to bookmark my blog!