If you’ve ever wondered how much you need to retire, there’s a quick way to get a number.
The rule
Once you have enough invested, you withdraw 4% of it in your first year of retirement, then raise that amount with inflation each year. Historically, that money lasted at least 30 years.
Flip it around
Take what you spend in a year. Multiply it by 25. That’s roughly how much you need invested.
- Spend $40,000 a year: about $1 million
- Spend $80,000 a year: about $2 million
- Spend $100,000 a year: about $2.5 million
That’s why your spending is the most important number in any retirement plan, not your income.
Where it breaks
- It assumes a balanced mix of stocks and bonds and a 30-year retirement
- Retiring early means a longer runway, so many planners use a lower rate
- A bad market in your first few years hurts the most
Worth knowing: Bill Bengen, the advisor who came up with the 4% rule, has since updated his research and now suggests 4.7%. Either way, treat it as a target, not a guarantee.
What I actually use: Fidelity for my Roth IRA and brokerage, and the rest on my What I Use page.
General education, not advice for your situation.
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