What is the 4% rule for retirement?

A comfortable retirement life only appears when you do not have to worry too much about financial matters. Therefore, planning and tracking your finances for early retirement is essential.

Before you have a plan, you must determine how much money you need to “live well” when you are no longer dependent on work and monthly salary.

Different ways to determine how much money you need before retirement include the 4% rule.

What is the 4% rule for retirement, and how does it benefit?

This is a simple rule. You only withdraw up to 4% of the amount you spend each year. This rule is based on the condition that all your money is invested at an interest rate above 4 %/year (after inflation).

Because investment will fluctuate, especially when there is a financial crisis. So if you only withdraw at 3 %/year, there is a high chance that your money will always stay supplied.

You can also use the 4% rule to calculate how much money is needed to achieve financial freedom. First, you need to know your total living expenses for a year. This includes rent (if you are still renting), vehicle, food, entertainment, travel, and more. This is the minimum cost to live a comfortable life in retirement.