## 4% Rule Calculator

How much money do you need to be Financially Independent?

It depends on two things:

Withdrawing 4% is considered safe in the retirement planning community so I stick with that to plan my Financial Independence (FI) number. Using that you will need 25 times your Annual Expenses to be FI. I put the quick math below, or to learn more about the 4% Rule and how much you need to be FI check out my series about what the 4% Rule is. Until then:

It depends on two things:

- How much money you spend a year
- How much are you comfortable withdrawing

**4%**Withdrawing 4% is considered safe in the retirement planning community so I stick with that to plan my Financial Independence (FI) number. Using that you will need 25 times your Annual Expenses to be FI. I put the quick math below, or to learn more about the 4% Rule and how much you need to be FI check out my series about what the 4% Rule is. Until then:

The math here isn't too bad, but let's break it down nicely.

The 4% Rule says you can take out 4% of your portfolio in retirement. So 4% x (FI Number) = (Annual Expenses)

To go the opposite way and figure out your FI Number you divide your expenses by yor withdrawal rate:

(FI Number) = (Annual Expenses) / 4%

This is the same as multiplying your Annual Expenses by the

1 / 4% (or 1 / 0.04) = 25

This is why the 4% Rule is sometimes called the "Multiply by 25 Rule."

If you want to use a more conservative withdrawal rate, like 3% you'd need 33 x (Annual Expenses).

A more aggressive withdrawal rate - 5% - you'd only need 20 x (Annual Expenses)

The 4% Rule says you can take out 4% of your portfolio in retirement. So 4% x (FI Number) = (Annual Expenses)

To go the opposite way and figure out your FI Number you divide your expenses by yor withdrawal rate:

(FI Number) = (Annual Expenses) / 4%

This is the same as multiplying your Annual Expenses by the

*Inverse*of 4% - which is 25.1 / 4% (or 1 / 0.04) = 25

This is why the 4% Rule is sometimes called the "Multiply by 25 Rule."

If you want to use a more conservative withdrawal rate, like 3% you'd need 33 x (Annual Expenses).

A more aggressive withdrawal rate - 5% - you'd only need 20 x (Annual Expenses)

## On the path to FI/RE?

Anyone,
and I mean Anyone, interested in learning more about FI/RE and how to go about it would be doing themselves a disservice by not having read The Simple Path to Wealth by J.L. Collins. He is the brilliant writer over at jlcollinsnh.com, and really knows his stuff.I've read the book several times, and referenced it when I was making videos here. There are two free ways to get it. First is the library. Its a great resource. Second is via a Audible trial membership. You can pick two books to get for free, and will own it completely... Even if you cancel the trial immediately. Trying a trial is a great way to support this site too. Check out the Audible offer here. |