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re: 400x your expected monthly expenses for retirement
Posted on 1/21/24 at 5:17 pm to hikingfan
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.
1
Posted on 1/21/24 at 7:49 pm to lynxcat
x300 (or 25x annual expenses) would align w 4% rule. x400 seems overly conservative but maybe useful for an extended early retirement. You have to account for drawing less than projected annual growth in order to protect against sequence of returns risk. Investments don't go up in a straight line. Inevitably there will be down years and if they hit early you can rapidly deplete your nest egg and never catch up. That's why withdrawal rates much over 4% increase failure risk. 4% safe withdrawal (w annual inflation increase) has ~95% success rate over 30 years.
This post was edited on 1/21/24 at 7:51 pm
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