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400x your expected monthly expenses for retirement
Posted on 1/21/24 at 5:09 pm
Posted on 1/21/24 at 5:09 pm
Anybody subscribe to this rule of thumb?
$10K to spend per month * 400 = Need to save $4M before you can retire as an example.
$10K to spend per month * 400 = Need to save $4M before you can retire as an example.
8
Posted on 1/21/24 at 5:17 pm to hikingfan
That’s a pretty dumb “rule of thumb”.
$4M portfolio generates $200K annually with only a 5% return (conservative portfolio) which is $80K in excess of spending (before taxes, albeit can typically be quite tax efficient in withdrawals in retirement if well planned).
In this scenario, you would never touch principle, cover all expenses, and probably die with $10M in the portfolio.
$4M portfolio generates $200K annually with only a 5% return (conservative portfolio) which is $80K in excess of spending (before taxes, albeit can typically be quite tax efficient in withdrawals in retirement if well planned).
In this scenario, you would never touch principle, cover all expenses, and probably die with $10M in the portfolio.
Posted on 1/21/24 at 5:59 pm to hikingfan
Shouldn't your expected monthly expenses decrease when you're retirement ago though? Ideally, no kid expenses and mortgage paid off or downsize to smaller house.
Posted on 1/21/24 at 8:37 pm to hikingfan
No. Most of these calculations leave out the fact that you will be receiving SS also. And it’s not going bankrupt, that’s just a scare tactic that politicians use. Government can print all the money they want.
Posted on 1/21/24 at 8:53 pm to hikingfan
Seems overly conservative. The other thing that people don’t keep in mind is that if you live on a conservative budget and save some of what you don’t spend, you can use that on overly expensive years.
Using the 4% rule of 3 million for $120,000 of income then one year you only spend $110,000 or do well in the stock market now you have a good chunk ‘extra’. It’s not like people that want $120,000 earn exactly that and spend exactly that every year.
If you live 1-2 years behind your market performance financially then it’s very easy to budget. In other words, don’t spend what you are currently earning. Spend what you made in the market last year or 2 years ago. So if you have an expensive year or a down year in the market, you adjust your spend accordingly and don’t dig yourself in a hole.
Using the 4% rule of 3 million for $120,000 of income then one year you only spend $110,000 or do well in the stock market now you have a good chunk ‘extra’. It’s not like people that want $120,000 earn exactly that and spend exactly that every year.
If you live 1-2 years behind your market performance financially then it’s very easy to budget. In other words, don’t spend what you are currently earning. Spend what you made in the market last year or 2 years ago. So if you have an expensive year or a down year in the market, you adjust your spend accordingly and don’t dig yourself in a hole.
Posted on 1/22/24 at 6:09 am to hikingfan
quote:Your rule of thumb equates to an anticipated 3% ROI.
Anybody subscribe to this rule of thumb?
That is pretty conservative.
I used 4% as my walkaway threshold which would drop your number from 400x to 300x with no planned drawdown in principle. I've seen others here using 5%.
But in the end, to each his own. It's about individual investor confidence, competence, risk tolerance, age, and intent.
E.g., if you plan to retire in your 40's, your 400x number is probably a good target. If you intend to retire at 65, and plan on a standard 40yr portfolio drawdown (using up all your holdings by age 105) along with interim ROI, 400x is far too conservative in my opinion.
Posted on 1/22/24 at 1:15 pm to hikingfan
I am never going to make it.
Dang it
Dang it
Posted on 1/24/24 at 8:22 am to hikingfan
I shared this information from fidelity and got downvoted so I don’t know
Here are Fidelity's age-based milestones you can use to track your progress:
By age 30: 1x your income
By age 40: 3x your income
By age 50: 6x your income
By age 60: 8x your income
Here are Fidelity's age-based milestones you can use to track your progress:
By age 30: 1x your income
By age 40: 3x your income
By age 50: 6x your income
By age 60: 8x your income
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