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This is not a good way to calculate it because it ignores volatility of the investment. There are decades of publications in the topic of sequence of returns an
by freddie_mercury 9y ago
This is not a good way to calculate it because it ignores volatility of the investment. There are decades of publications in the topic of sequence of returns and the impact on retirement.
$25,000 is likely a little too low but $70,000 is way, way too high.
Most people who've done research agree that something like $25,000 to $35,000 a year from $1,000,000 is reasonable for someone retiring extremely young.
- ChuckMcM 9y agoWhich corresponds to 2.5 - 3.5%. Back in the 90's when I was doing my research 4.2% was the "magic" number. Of course your life expectancy has to factor in to, so if you boost your withdrawal rate as you get older you can try to hit $0 right when you die. (like timing the market, not recommended) As people point out the thing to remember is that your costs change too, your health care costs go up but if your family moves out and you pay off your house your outlays go down. "Downsizing" or reducing the owning of expensive things (especially ones that require maintenance) can really help your burn rate.
- alasdair_ 9y agoMay I suggest taking a look at https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/ https://earlyretirementnow.com/2016/12/07/the-ultimate-guide... - it's the best guide I've ever found on optimal safe withdrawal rates.
- freddie_mercury 9y agoYour number was almost certainly based on a 30 year retirement timespan. An athlete might be 30 years old at retirement and needs to think about a 65-year retirement timespan.