“This whole financial independence story might sound nice and dandy, but how will I ever get there?” I hear you think. “How much money do I need to retire?” and most importantly: “What can I do NOW to make sure I get (and stay) on track to reaching my financial goals?”. Well, I am glad you asked as it is about time that we start looking at putting together a lifetime plan for your financial journey that will make sure you reach your financial dreams and that will give you the motivation and blueprint towards achieving those goals.
In order to get that plan together we will first discuss the 4% rule, a hugely popular and helpful guideline to planning for retirement.
The Trinity Study
In the late 90s and then again in 2009, three professors from Trinity University conducted a now famous study on how different withdrawal percentages affected various retirement portfolios over a 30 year period.
What they calculated in particular was how the portfolios stood up against various withdrawal rates, i.e. whether the portfolios would stand the test of time and outlive the withdrawals. If a withdrawal rate succeeded it meant there was still money left over in the portfolio after the time period of withdrawals ended. Their studies included: Continue reading “Step 79: The 4% Rule”