A short and succinct formula to figure out the lifestyle you want and find out how much that costs monthly is:
Assuming your base minimum is $4k/month, this means that you need $48k/year ($4k/month x 12 months).
Based on trinity studies of 4% base withdrawal rate, you will need to take you base yearly target ($48k) divided by 4%, which means you need to accumulate $1.2m either by investing and compounding (this depends on your earn rate, save rate, invest rate and returns-on-investment rate).
Refer to my early retirement case studies.
For some lucky ones, you may inherit money / trust or some may strike lottery, but as this is more based on luck, favor and randomness which is typically out of our control, I do not want to comment on such matters
Notes:
- With a 60/40, 40/60 bond/equity portfolio, there’s a 97.5 chance that if you withdraw 4% annually that the portfolio will perpetually last ie last forever
- If you’re like me, you may want more room for buffer and errors, you can add safety buffers based on % eg additional 10, 20, 30 or more percentages to the amount you need to accumulate.
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