2021 marked the first full year of our lifetimes living under global pandemic conditions, and hopefully it will be the only one! Despite the continuing authoritarianism, economic upheaval, suffering and fear associated with the COVID-19 coronavirus pandemic, the U.S. stock market had another incredible run last year.

For the full year, the S&P 500 returned nearly 29%, including reinvested dividends. Returns in the fourth quarter were particularly strong, at around 11%, which helped our portfolio bounce back from a move in the wrong direction during Q3.

As we begin 2022, we’re closer to financial independence and early retirement than we’ve ever been. I’m cautiously optimistic this may be the year when we can finally exit the rat race – potentially a year later than originally hoped when I started writing here in 2017, but in line with my thoughts when we reset our plans in the early stages of the pandemic. For the first time since we started on this journey, we’ve achieved two of the three long-term financial goals we’ve been pursuing.

Of course, plans are always subject to change. Bidenflation continues to eat away at the purchasing power of Americans, supply chains around the world remain disrupted, and coronavirus cases are still near record levels as we approach two years since we first heard the phrase “15 days to slow the spread.” Three weeks into 2022, our finances look materially worse than they did at the end of December, as the S&P 500 has dropped over 7% already this year, and the NASDAQ has plunged around 11%! Hopefully markets will stabilize in the coming weeks, and over the next few months emergency measures associated with the pandemic will evolve into a common sense approach to potentially living with endemic conditions as we get closer to warmer weather in the Northern Hemisphere.

I. Net Worth: 119.9% of Goal (+5.0% during Q4 21)

The booming stock market during Q4 enabled us to meet our short-term net worth goal, which was to finish 2021 at 118% of our long-term target. Our net worth climbed by 500 bps during Q4 to its highest level ever as we started 2022.

After hitting our most recent goal, we need a new short-term target for our net worth. Our latest interim goal is to get to our potential early retirement date at the middle of the year with a net worth that’s 125% of our long-term target. This one feels very ambitious, knowing that we’ve already lost some ground since the end of last year. We’ll need the stock market to bounce back from its recent struggles, a good annual bonus from work, responsible spending, and a lot of luck to hit this target, but we didn’t get to where we are today without being ambitious!

II. 529 Account Funding: 104.0% of Goal (+5.8% during Q4 21)

The great news is that the robust stock market and some additional contributions enabled us to reach our long-term 529 account funding goal by the end of last year! As we hopefully enter the final stages of our quest for FIRE, it’s an enormous win to have two of our three primary financial goals achieved!

The bad news is with the stock market down so much in the early weeks of 2022, when I looked at those account balances this morning, we’re back below where we were when we started the fourth quarter in October. But we’re only marking ourselves to market on a quarterly basis here, so for the time being, this goal is achieved!

Our new short-term goal is to keep the progress from last quarter going, and to get to mid-year with 106% of our long-term target in the educational accounts for our children. Clearly, we’ll need the stock market to bounce back and to make some additional contributions to achieve this, given the hole that markets have dug for us over the first three weeks of 2022.

III. Passive Income: 64.8% of Goal (+0.5% during Q4 21)

Our passive income goal remains our biggest challenge. It has fallen in five of the past seven quarters, so I guess the good news is that last quarter was one of the two where we actually made a little bit of progress. I’ve long thrown in the towel on actually achieving this goal before early retirement (in retrospect, I think it would be hard to achieve before a “normal” retirement), but at least we’re moving, however modestly, in the right direction.

We’ve been fighting the massive headwind of lower interest rates over the past several quarters, as every time one of our certificates of deposit comes up for renewal, the interest rate we earn drops by 50-75%. With the Fed poised to potentially start raising interest rates in an effort to combat inflation, there’s some hope that the tide will start moving in our direction over the next year or two, but a material climb in what lenders are paid doesn’t seem imminent.

While we made a little progress on our passive income, we still missed out on our short-term goal, which was to get to 70% of our long-term target by the end of 2021. I expect our passive income aspirations to remain a challenge, even as we try to move some cash into dividend stocks, but we’ll keep the same short-term target for now – 70% – and work hard to get there by mid-year.

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

We’re less than six months away from our target FIRE date, and things are starting to get real!

Our net worth and 529 funding goals have both been met, so barring an even larger downturn in the stock market, we’ve achieved the two of our three goals that were ambitious, but realistic, in the timeframe we laid out almost five years ago. I know we won’t be able to achieve our passive income goal any time soon, or perhaps ever, so I’m not planning to let that one materially impact my decision making in the coming months.

Right now, I think a lot of it comes down to what occurs in the financial markets and the broader economy. If stock markets fall another 10% or more from here, our account balances continue to shrink, and inflation continues on at close to the 7% consumer price index increase experienced last year, it will get harder to potentially give up a regular paycheck. If markets stay where they are, I get a good bonus for 2021, and there’s a sense of some normalization around inflation and the pandemic, it could be time to find something more fulfilling to do with much of my time. And if the stock market roars back and is regularly hitting record levels again in the coming months, the decision is pretty clear.

The finish line absolutely remains in sight, but the path is not completely unobstructed – we’ll see what happens over the next three months!