3 ms·
The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows
by dougSF70 4y ago
The theory goes that a 4.5% draw rate from your capital will ensure your capital is preserved (relative to inflation average of 2.5%) for ever provided it grows at 7% a year in the long run. This is an achievable long term capital growth rate.
If you can live of $61k a year then you will need 61,000 / 0.045 = $1,355,555 of investments to deliver $61k a year without degrading the value of the capital relative to inflation.
I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more.
- acdha 4y ago> I guess the 90th percentile refers to the fact that 10% of people in the US have this amount invested or more. I think the 10% number is referring to something a bit different. The stats referenced are net worth, which in most cases is significantly composed of someone’s house & other property which doesn’t easily provide a passive income and 401ks which aren’t accessible. I’d be surprised if the number of people who have $1.3M in normal investments is greater than 1%.