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Early Retirement Planning Cheat Sheet

The core ideas of Early Retirement Planning distilled into a single, scannable reference — perfect for review or quick lookup.

PiqCue — piqcue.com/early-retirement-planning/cheatsheet

Quick Reference

The 4% Rule (Safe Withdrawal Rate)

A guideline originating from the 1998 Trinity Study suggesting that retirees can withdraw 4% of their portfolio in the first year of retirement, adjusting annually for inflation, with a high probability the portfolio will last at least 30 years. For early retirees with longer time horizons, lower rates of 3% to 3.5% are often recommended.

FIRE Movement (Financial Independence, Retire Early)

A lifestyle movement focused on extreme savings rates and frugal living to achieve financial independence decades before traditional retirement age. Variants include Lean FIRE (minimal spending), Fat FIRE (higher spending), Barista FIRE (part-time work for benefits), and Coast FIRE (enough saved that compounding alone will fund traditional retirement).

Financial Independence Number

The total investment portfolio value needed to sustain annual living expenses indefinitely. Commonly calculated by multiplying annual expenses by 25 (the inverse of the 4% withdrawal rate) or by 33 for a more conservative 3% withdrawal rate.

Savings Rate

The percentage of after-tax income that is saved and invested rather than spent. In early retirement planning, the savings rate is the most powerful lever for determining time to financial independence, far outweighing investment returns or total income in importance.

Sequence of Returns Risk

The risk that poor investment returns in the early years of retirement will permanently deplete a portfolio, even if average returns over the full period are adequate. This is especially dangerous for early retirees because they have longer time horizons and more years of withdrawals.

Tax-Efficient Withdrawal Strategy

The planned order and method of drawing income from different account types, including taxable brokerage accounts, tax-deferred accounts like traditional 401(k)s and IRAs, and tax-free accounts like Roth IRAs, to minimize lifetime tax burden during retirement.

Roth Conversion Ladder

A strategy for accessing tax-deferred retirement funds before age 59.5 without penalties. Money is converted from a traditional IRA to a Roth IRA, and after a five-year waiting period, the converted principal can be withdrawn tax-free and penalty-free.

Asset Allocation for Early Retirement

The distribution of investments across different asset classes such as stocks, bonds, real estate, and cash, tailored for a potentially 40- to 50-year retirement. Early retirees typically maintain a higher stock allocation than traditional retirees to ensure growth that outpaces inflation over decades.

Healthcare Bridge Strategy

A plan for obtaining health insurance coverage during the gap between early retirement and Medicare eligibility at age 65. Options include ACA marketplace plans, health sharing ministries, COBRA continuation, a working spouse's employer plan, or part-time employment that provides benefits.

Coast FIRE

A milestone where enough money has been saved and invested that, even with no additional contributions, compound growth alone will grow the portfolio to a sufficient size for traditional retirement at age 65. After reaching Coast FIRE, a person only needs to earn enough to cover current expenses.

Key Terms at a Glance

4% Rule:A retirement withdrawal guideline suggesting 4% of the initial portfolio can be withdrawn annually, adjusted for inflation, with high probability of lasting 30 years.
Asset Allocation:The distribution of investments across asset classes such as stocks, bonds, real estate, and cash to balance risk and return.
Barista FIRE:A semi-retirement approach where investments cover most expenses while part-time work provides health insurance or supplemental income.
Bond Tent:A strategy of temporarily increasing bond allocation around the retirement date to mitigate sequence of returns risk.
Coast FIRE:The point at which existing invested savings will grow through compound returns alone to fund a traditional retirement without further contributions.
Compound Interest:Interest earned on both the initial principal and previously accumulated interest, causing exponential wealth growth over time.
Drawdown Rate:The percentage of a retirement portfolio withdrawn annually to fund living expenses.
Expense Ratio:The annual fee charged by an investment fund, expressed as a percentage of assets under management.
Fat FIRE:A FIRE variant targeting a higher annual spending level in retirement, typically above $100,000, requiring a larger portfolio.
Financial Independence (FI):The state of having sufficient investment income or assets to cover all living expenses without requiring active employment.
Financial Independence Number:The total portfolio value needed to sustain annual expenses indefinitely, commonly calculated as 25 times annual expenses.
Geographic Arbitrage:Relocating to a lower cost-of-living area to reduce expenses and accelerate the path to financial independence.
Index Fund:A mutual fund or ETF designed to replicate the performance of a specific market index, offering broad diversification at low cost.
Lean FIRE:A FIRE variant involving retirement on minimal annual spending, typically under $40,000 per year.
Medicare:A federal health insurance program for people aged 65 and older, representing the point at which healthcare costs decrease significantly for retirees.

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Early Retirement Planning Cheat Sheet - Quick Reference Guide | PiqCue