ever wondered how much do you need to retire well what if there was an exact formula and it's actually much simpler than you probably think no complex Financial models needed and you don't even need to pay an expensive financial adviser to work this out Simply work out how much money you need each month to live a comfortable life your basic needs any travel costs and any other miscellaneous costs let's say 3K per month multiply this by 12 to get your yearly figure in our case that's 36k K now multiply this by 25 giving you 900k
and that is exactly the amount of money you need to retire but why 25 well this is known as the 4% rule if you were to invest the 900k in a Index Fund like the S&P 500 and earned a return of 4% per year that would equate to exactly 36k meaning you can live comfortably without ever having to withdraw your original principle but how realistic is this well looking at the last 100 years the S&P 500 has delivered average returns of 10% per year but the past isn't an indicator of the future and some years
may be less than 4% however it's fairly safe to assume a 4% return is not entirely impossible but here are some of the downsides of the 4% rule the first being inflation 36k will be worth less with each passing year due to things becoming more expensive so you may need to invest more by regularly topping up or hope for higher returns secondly saving 9900k in itself is a major challenge with living costs already at an all-time high saving this kind of money would seem like a distant dream for most people unless something drastically changes in
their income or lifestyle so in theory it's possible to retire early with the 4% rule but in reality how many actually achieve this before the typical retirement age is questionable
