2020 will likely be remembered as one of the craziest years in our lifetimes. A year ago, I never would have thought that going to the grocery store without a facemask could feel more dangerous than BASE jumping. For the record, I haven’t done either over the past ten months – but hope to head out in public without a mask at some point in the future!

Over the past twelve months, we’ve experienced the worst global pandemic in a century, the highest U.S. unemployment rate since the Great Depression, and the most contentious presidential election of my lifetime. While the value of the S&P 500 index dropped by more than one-third during February and March, the bear market was incredibly short-lived. By the second half of the year, the U.S. stock market was regularly hitting new record highs, and the S&P 500 generated full-year returns of more than 18%!

The big rally in the stock market continued in the fourth quarter, with the S&P 500 up by 11% over the final three months of 2020. The great finish to an unforgettable year provided a tailwind for our finances as we track our key financial objectives on the path to financial independence and early retirement.

I. Net Worth: 101.5% of Goal (+8.2% during Q4 20)

Another great quarter for the U.S. stock market boosted our net worth during Q4. Our net worth rose by almost 9% during the quarter, allowing us to achieve our net worth target much sooner than I believed was possible when I revised our FIRE goals two quarters ago.

It feels great to finally have a net worth that might allow us to retire early, but we’re not crafting our letter of resignation yet. Since we started tracking our finances here three and a half years ago, we’ve experienced two quarters – Q4 2018 and Q1 2020 – when our net worth dropped precipitously due to poor stock market returns. More time to build a larger cushion is not the worst thing in the world, and we still haven’t achieved either of our other key financial goals.

That said, last quarter’s great returns allowed us to achieve our previous short-term target, which was to get to 95% of our long-term goal by the end of March. Our new short-term target is to be at 105% of our ultimate goal at the end of June. My employer performed reasonably well in 2020 given the challenging economic environment, and my team also had a good year, so I’m hopeful for a decent year-end bonus, even if it’s down somewhat from prior years.

II. 529 Account Funding: 82.1% of Goal (+11.6% during Q4 20)

We made even better progress on the funding levels of our children’s educational accounts in Q4 than we did with our net worth. The value of our 529 accounts climbed by more than 16% over the past three months, moving us 11.6% closer to our target since the beginning of October.

That result makes sense, as these accounts have a larger exposure to stocks right now than our overall investment portfolio, and we also made additional contributions to the 529 plans. The strong performance allowed us to hit our short-term goal of getting 75% of the way to our long-term target by the end of last year!

With six quarters left to complete the last 18% of our 529 account funding goal, the pace we need to hit our target is pretty easy to calculate. We’d like to be 88% of the way to our long-term goal by mid-year. As with our net worth goal, we’ll need supportive financial markets for this to become a reality over the next six months. We’ll undoubtedly also need to make some additional contributions into these educational accounts to hit this target.

III. Passive Income: 67.5% of Goal (-1.3% during Q4 20)

While we’ve made great progress on our net worth and 529 account funding goals, passive income remains a challenge. Our expected annual passive income dropped by almost 2% in Q4, moving us 130 basis points further away from our long-term target. Our passive income has now declined for three consecutive quarters, as falling interest rates negatively impact how much we’re earning as CDs come up for renewal. The pressure is likely to continue going forward, as last week I renewed a one-year CD that had been paying us 2.0% at a new annual rate of just 0.6%.

Our short-term goal was to reverse recent declines and get to 70% of our ultimate target as of December 31, 2020, which we obviously missed. We’ll keep a short-term goal of getting back to 70% – now hopefully by the end of June – but unless interest rates start increasing, it’s likely to remain a hope trade.

IV. Target FIRE Date: Friday, July 1, 2022

We’re now less than a year and a half from our target FIRE date, and have reached the most important of our three goals, our net worth target! I’m increasingly optimistic we’ll also be able to achieve our 529 account funding goal over the next six quarters, although I’m even more certain we won’t be able to achieve our passive income objective. But we’ll keep trying!

How was the crazy year of 2020 for your finances?