The 4% Rule
The 4% rule states you can withdraw 4% of your portfolio in year one, then adjust for inflation, with high probability it lasts 30 years. Target nest egg = annual expenses x 25.
According to Investopedia, the 4% rule is a guideline for retirement withdrawals that aims to prevent retirees from running out of money.
Nest Egg Needed = Annual Expenses x 25
Monthly Income = Nest Egg x 4% / 12
Frequently Asked Questions
Multiply your desired annual retirement income by 25. If you need $60,000/year, you need a $1.5M nest egg. Adjust for Social Security and pensions that reduce how much your portfolio must provide.
As early as possible. $200/month from age 25 at 7% grows to $525,000 by 65. The same amount starting at 35 yields only $243,000. Time in the market is the single biggest factor in retirement outcomes.