Are the 2026 CGT changes actually a big deal for FIRE investors using a 4% drawdown strategy?
With the new CGT changes in the 2026 budget, I've been trying to work out the real impact on a FIRE drawdown strategy.
My understanding is that under a 4% drawdown rule on a $2.7M portfolio you're only selling $108,000 worth of units per year, not liquidating the whole portfolio at once. So the CGT calculation only applies to the gain component of those units sold annually, not the full portfolio value.
If roughly 74% of each unit's value is gain at retirement, that's about $80,000 in gains per year. Under the new inflation-indexed rules the real gain after 25 years of inflation is closer to $44,000, taxed at the 30% minimum, so around $13,200 in CGT annually. Effective rate of about 12% on the withdrawal.
Interestingly that's almost identical to what you'd have paid under the old 50% discount rules at a 32.5% marginal rate.
Am I missing something or is the actual annual CGT impact of these changes pretty negligible for long term buy and hold FIRE investors who are only selling 4% per year?
Seems like the people most affected are those planning a full liquidation event rather than a slow drawdown.