The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”

In the world of early retirees, we have a concept that goes by names like “The 4% rule”, or “The 4% Safe Withdrawal Rate”, or simply “The SWR.”

As with all things financial, it’s the subject of plenty of controversy, and we’ll get to that (and then punch it flat) later. But for now, for those new to the concept, let’s define the Safe Withdrawal Rate:

The Safe Withdrawal Rate is the maximum rate at which you can spend your retirement savings, such that you don’t run out in your lifetime.

That sounds nice and simple, but many people consider it an unpredictable thing to nail down.

After all, you don’t know what sort of rollercoaster rides the economy will take your retirement savings on, and you also don’t know what rate of inflation will persist through your lifetime. Will a box of eggs cost $6.00 a dozen when you’re 65, or will it be closer to $60? So how can we possibly know how much money we will need to live on in retirement?

The answers you get to this question vary widely.

Financial beginners (about 95% of the population) tend to randomly just throw out a number between 5-100 million dollars.

Financial advisers who aren’t Mustachians will tell you that it depends on your pre-retirement income, (with the implicit assumption that you are spending most of what you earn) and the end answer will be somewhere between 2 and 10 million.

Financial Independence enthusiasts will have the closest-to-correct answer: Take your annual spending, and multiply it by somewhere between 20 and 30. That’s your retirement number.

If you use the number 25, you’re implicitly using a 4% Safe Withdrawal Rate, which is my own personal favorite number.

So where does this magic number come from?

At the most basic level, you can think of it like this: imagine you have your ‘stash of retirement savings invested in stocks or other assets. They pay dividends and appreciate in price at a total rate of 7% per year, before inflation. Inflation eats 3% on average, leaving you with 4% to spend reliably, forever.

I can already hear a chorus of whines and rattling keyboards starting up, so let’s qualify that statement. I admit it: that is the idealized and simplified version.

In reality, stocks go up and down every year, and so does inflation. Over a long multi-decade period like the gigantic retirement you and I will be enjoying, enormous things have happened in the past. The Great Depression. The World Wars, Vietnam, and the Cold War. The abandonment of the gold standard for US currency and years of 10%+ inflation and 20%+ interest rates. More recently, the great financial crash and a slicing in half of of real estate and stock values.

If you happened to retire in 1921 on a mostly-stock nest egg, you would have experienced an enormous stock run-up for the first eight years of your retirement. You’d be so rich by the time the 1929 crash and the Great Depression hit, that you’d barely notice the trouble in the streets from your rosewood-paneled tea room.

On the other hand, if you retired in early 2000 while holding stocks, you saw an immediate and huge drop in your savings along with low dividend yields – and your ‘stash may be have had some scary times in the early days, and again around 2009. Would you still have any money left today?

In other words – the sequencing of booms and crashes matters. Ideally, you want to reach your magic retirement number in a time of nice, reasonable stock prices, just before the start of another long boom so that your retirement starts off on a good foot. But you can’t predict these things in advance. So again, how do we find the right answer?

Luckily, various Early Retirement Ninjas have done the work for us. They analyzed what would have happened for a hypothetical person who spent 30 years in retirement between the years 1925-1955. then 1926-1956, 1927-1957, and so on.

They gave this imaginary retiree a mixture of 50% stocks and 50% 5-year US government bonds, a fairly sensible asset allocation. Then they forced the retiree to spend an ever-increasing amount of his portfolio each year, starting with an initial percentage, then indexed automatically to inflation as defined by the Consumer Price Index (CPI).

This simple but important series of calculations was called the Trinity Study,  and since then it has been updated, tweaked, and reported on, and it’s still the subject of lots of debate today. Wade Pfau is one reasonable voice in the industry, and he created the following useful chart showing what the maximum safe withdrawal rate would have been for various retirement years:

As you can see, the 4% value is actually somewhat of a worst-case scenario in the 65 year period covered in the study. In many years, retirees could have spent 5% or more of their savings each year, and still ended up with a growing surplus.

This brings me to a critical point: this study defines “success” as not going broke during a 30-year test period. To people like you and me who will enjoy 60-year retirements, that would not be successful – we want our money to last much longer than 30 years.

Luckily, the math in this case is pretty interesting: there is very little difference between a 30-year period, and an infinite year period, when determining how long your money will last. It’s much like a 30-year mortgage, where almost all of your payment is interest. Drop your payment by just $199 per month, and suddenly you’ve got a thousand-year mortgage that will literally take you 1000 years to pay off. Increase the payment by a few hundred, and you have a fifteen year payoff!

In other words, above 30 years, the length of your retirement barely affects the safe withdrawal rate calculations.

So far, we’re liking the 4% rule quite a bit, right? But yet whenever I mention it, I get complaints. Let’s review a few of them:

  • The trinity study is based on a prosperity anomaly: the United States during its boom years. You can’t project good times like that into the future, because we’re just about to enter the Doom Years!
  • Economic growth and stock appreciation was all based on cheap fossil fuels. How will this all look after Peak Oil hits us!?
  • You can’t take a one-size-fits-all rule and apply it to something as varied as an economy and an individual’s life! My health care costs could go up! Hyperinflation could strike!
  • Even at a 4% withdrawal rate, there’s still a chance of portfolio failure. That means I’ll be flat broke and out on the street in my old age. I recommend doubling your savings, and going for a 2% SWR instead because there’s never been a failure in that scenario!
  • This is all wrong! Waaah, waaah!

That’s all well and good. While there are solid economic analyses that I believe can out-argue the points above, I’m not patient or clever enough to re-create them here. Pessimists are free to enjoy their pessimism and even write about it on their own blogs.

Instead of debating unprovable points like those above, we can completely squash them with our own much more powerful list of points:

The trinity study assumes a retiree will:

  • never earn any more money through part-time work or self-employment projects
  • never collect a single dollar from social security or any other pension plan
  • never adjust spending to account for economic reality like a huge recession
  • never substitute goods to compensate for inflation or price fluctuation (vacation in a closer place one year during  an oil price spike, or switch to almond milk in the event of a dairy milk embargo).
  • never collect any inheritance from the passing of parents or other family members
  • and never do what most old people tend to do according to studies – spend less as they age

In short, they are assuming a bunch of drooling Complete Antimustachians. You and I are Mustachians, meaning we have far more flexibility in our lifestyles. In short, we have designed a Safety Margin into our lives that is wider than the average person’s entire retirement plan.

So now that we’re feeling good about the 4% rule again, let’s bring the point home:

Far from being a risky proposition, planning for 4% Safe Withdrawal rate is actually the most conservative method of retirement saving I could possibly recommend.

To apply it in real life, just take your annual spending level, and multiply it by 25. That’s how much you need to retire, at the most. A $25,000 spender like me needs $625,000. I’ve got more than that, plus various safety margins in the lifestyle, so all is good.

Without undue risk, and as long as you have skills that can be used to earn money eventually in the future (hint: you do), I can even advocate an SWR of 5%. In other words, get your expenses down to $25k, and you can quit your job on $500k or less. Then you can use the methods described in First Retire, then Get Rich to gradually increase your safety margin (and effectively decrease your withdrawal rate) as you age.

So there’s no need to debate. 4% is a perfectly good answer, which means 25 times your annual expenses is a perfectly good goal to save for. Along the way, you might find your annual expenses melting away, which makes things ever-more-attainable (as shown in the shockingly simple math behind early retirement post). But worry, you must not.

And if you’re ready to play with the numbers even further, check out the FIREcalc website. It’s basically like owning your own Trinity Study machine, except you can tweak variables (look at the tabs at the top of the page). In the link provided, I used this data:

  • 500,000 portfolio
  • 25,000 annual spending (5% withdrawal rate).

All alone, a plan like that over 60 years of retirement only has a 45% success rate, historically speaking.

But if you make adjustments which include:

  • $8,000 per year of social security starting about 25 years from now
  • “Bernicke’s Reality Retirement plan” of dropping spending slightly with age
  • Just $3,000 per year in fooling-around income

You’re already at an over 90% success rate. Another hundred or two dollars per month and you have a 100% chance of success, even without invoking many of my other bullet points above.

So that, at last is the long-awaited Safe Withdrawal Rate article.

In the hands of financial infants, the rule is dangerous and scary. But in the hands of Mustachians, nothing is scary. Planning for a 4% withdrawal rate is a shiny, bulletproof limousine of a retirement plan and you can ride it all the way to the party at Mr. Money Mustache’s house.

  • David June 4, 2014, 10:20 pm

    I can’t help but be a bit discouraged. I’m 55, have $185,000 in savings plus $200,000 equity in my home, which is paid for. Don’t want to sell my house, but, while not impossible, it could be tough to live on $7,500 using the 4% rule. Still, I love the article (as well as all the others I’m discovering….I’m new here!).

    • Mr. Money Mustache June 5, 2014, 8:51 am

      Aha, but there are still more options:
      – You’re not far from Social Security eligibility (or similar pensions if you are in another country), which will provide much more than $7500/year starting only 12 years from now. So you could spend you $185k at a faster rate in the years between now and then
      – You could take on enjoyable part-time work if you don’t like your current job, or you could keep the current one a couple years longer.
      – Or you could get creative and rent out a room in your house, or move to a duplex and live in half of it if you really want overnight freedom.

      Congratulations! You’re almost there.

    • jlcollinsnh June 5, 2014, 9:19 am

      Hi David…

      Let me second the comments that Mr. MM has offered and with his indulgence refer you to this post of mine: http://jlcollinsnh.com/2014/01/14/case-study-7-what-it-looks-like-when-everything-financial-goes-wrong/

      In it you’ll see my pal Tom hit retirement at 62 by being laid off and having less than zero assets. Not only didn’t the world end, he has a great life.

      In addition to the money advice you find here, Mr. MM talks a lot about living well on little. My guess is the more you hang out here, the more comfortable with your situation you’ll become!

    • G-fiberific June 5, 2014, 2:20 pm

      David, I see myself in you in about 10 years! It’s amazing to me that you’ve done so much! As MMM pointed out, you can’t forget about the retirement benefits that are just around the corner and with the house paid off you have that much more save-ability, and one less thing hanging around your neck during retirement. Yeah, we may feel like we have squandered our youth, but at least we can retire financially independent, or at least well enough so at most a fun part-time job will take care of the rest.

      What is even more funny to me is that my retirement income will be very similar to jlcollinsnh’s Marine friend (me in 20 years!). Although I have a downright boring life compared to his, I’m liking how it’s going and it works for me.

      At retirement, my financial income will be from 4 or 5 sources, and all combined should come close to $3000/mo:
      Social Security
      Small, but respectable and stylish ‘Stash
      Part-time work (hoping this is optional, and must be fun)

  • David June 5, 2014, 4:24 pm

    Wow, thanks to you who responded to my post! I may actually get some sleep tonight! ;-)

    Mr. MM: Thanks for your words. This is a great blog/website and I’ll visit daily.

    jlcollinsnh: Your friend’s story is truly inspirational. Thanks for sharing!

    G-fiberific: Thanks, and good luck to you!

    Fortunately my father taught me well. If I took nothing else away from him, it was learning to live BENEATH my means and to STAY OUT OF DEBT. I’m forever thankful to him for that advice. I’m living totally debt-free….that’s gotta be worth something!

    Good luck to all!

  • Lou June 14, 2014, 1:19 am

    Although Wade Pfau’s work around analyzing “safe savings rates” is much more intriguing in terms of retirement planning IMHO, his validation of a 4% SWR definitely helps.

  • bob werner June 18, 2014, 9:34 am

    Here’s some interesting math based on the 4% theory.

    For each $100 per month spent in retirement, one would need to save $30,000. (100 times 12 times 25)
    If one invests 30K per year then the cost per $100 spending per month is one year of work.

    So let’s do some napkin figures if you are choosing certain lifestyle items post retirement –
    Cell phone – 75 per month
    Cable – 75 per month
    Car gas/ins/tax/depreciation/etc – 200 per month
    Gym membership – 40 per month
    Restaurant meals – 200 per month
    Beer/wine/liquor – 50 per month
    Miscellaneous pissing away money – 150 per month
    Total = 800 month

    Years needed to work equals 8 extra. Basically it is 1 year of work for every 100 monthly spent post retirement.

    So, Is it really worth 8 years of your life for the items above?

    • Vik February 19, 2015, 8:54 am

      I’ll take beer + cell + car for 3.5 extra years of work. 40-50yrs of retirement without beer or a car sounds grim. With a lot more travelling when working less a cell is really handy to stay in touch with my friends and family.

      — Vik

      • Joel February 19, 2015, 9:49 am

        We’re not trying to tell anyone to do without around here. Just to make the choice consciously instead of blindly pissing away money like it doesn’t matter at all. It also helps to show how important “hacking” said expenses becomes (switching cell phone to Ting at $35/mo just saved six months of your life)!

        If you are willing to trade 20 years of work for a Ferrari, then by all means…

        Of course the other part of the equation that Bob didn’t hit on much is the savings rate: if you can “suffer” for a few years and save more, then you can receive more abundance once in retirement.

  • Money Saving June 28, 2014, 7:45 am

    I love coming back to this article over and over again. It has truly changed my whole perspective on life and what I plan to do for the next 40 years. Thank you MMM!

  • Seth July 2, 2014, 5:24 pm

    It’s not clear to me how much of the 25x (principal) is left when you die. All of it? Some of it? Zero? I missed some details about how a SWR of 4% draws down the principal over time (or doesn’t). Thanks.

    • Matt July 2, 2014, 6:27 pm

      Seth take a look at Paul Merriman web site. He did a study from 1970 to 2013 about withdrawal percentages. I quit my full time job and was also wondering about that 4% rule. His study shows positive results for that 40+ year time frame.
      I current have rental income plus a part time fun job. I like the 4% flexible withdrawal plan. He explains the concept and it makes sense. The bottom line is to watch your spending the year after a market down turn. Check his work out.

  • Brother July 3, 2014, 12:31 pm

    Could you elucidate the mechanics of the withdrawls? Do you withdraw once a year, every month? Do you reinvest divs as they come along or… Do you sell of bonds/stocks first, or some other selling strategy?

    • Matt July 4, 2014, 11:30 am

      I will try to only use dividends and cap gains if and when I need money from my investments. Paul Merrimen discussed that he takes withdrawal at beginning of year and re balanced the portfolio at the same time. That makes sense since if you are under 60 your retirement accounts can’t be used currently. I only take dividends or capital gain distro if I know I need cash for some upcoming expense. Therefore I re balance in retirement accounts currently. (prevent any taxes I can) The way I structured my income is I cashed out $200,000 worth of mutual funds in 2013 since my portfolio grew by close to $300,000 in the course of 16 months. I used that money to buy another rental property. The 2 rental properties generate enough income to cover my annual bills plus some. I just feel that the flexible withdrawal method with my taxable accounts makes sense and when I start spending off the accounts I will use divs and capital gains. If you don’t sell shares theoretically the money wouldn’t run out. I’m just very conservative and I like property that keeps cash flow. Also I landed a PT job 3 days a week that is fun and pays more than I budgeted for when I knew I was giving up my job. I work because I want to and the boss knows that so it going well so far. My biggest problem is that I was in the saving mode so long (29 years i’m 46) I have to retrain my brain that to sell some mutual fund shares is OK. So depending on your age and portfolio size along with risk tolerance will determine how you generate income. I just am more convinced that the flexible 4% rule is a rational way of using your money without running out. Just watch the markets and balances and moderate spending when needed.

    • JB September 2, 2014, 8:41 am

      If you dollar cost averaged while working, you should DCA while in retirement. Take out X per month on the 1st of the month just like a paycheck. You can always take out more or less depending on your needs. That way, your money will still grow. Why take out $80K on January 1st if you can take out $6K per month.

      • Matt October 9, 2014, 8:16 am

        I guess you could take out money every month but the idea is to lock that spending level in for the year. I think that is good when markets are going up but not so great when they go down. I do feel that you have to be flexible in the dollars coming in each month and that is why Paul Merrimen says it’s best to have over saved. Like this post suggest along with living within ones means. For myself I like having rentals for cash flow and a hope for future growth. The remaining amount of my portfolio is diversified in mutual funds and taxable accounts, IRA< and 401K. So I plan on using taxable accounts until 70 and when I quit the part time job start the SWR plan lump sum in the beginning of each year.

  • peter August 14, 2014, 9:13 am

    For a 30 year retirement period, using the S&P500 returns since August 1984, you could use a SWR of 5.76% and apply a 5.76% rate of inflation.
    Today’s $100 is Aug 2044”s $548 with that kinda of inflation.

    Using the performance of the S&P500 and SWR of 5.76% and inflation of 5.76%
    If you\d retired in August 1984, for every $100 you would have $32 left today, 30 years later.
    When the wall came down your $100 would have been $155, at the height of the dot-com boom you’d have $398, on 911 you’d have $259 and at the depths of the Great Recession, you\d have $95

    Obviously if you lower the rate of inflation, the SWR can go even higher and if you lower the SWR you can go longer than 30 years.

    • Mr. Money Mustache August 14, 2014, 10:28 am

      Interesting specs – how did you calculate them?

      Looking up inflation from 1984 to today, in reality 100 1984 dollars is only $229 today, which means we’ve seen just under 3% compounded inflation during that time. Not bad at all, considering the interest rates of the 1980s..

      • peter August 15, 2014, 3:31 am

        I used the historical S&P500 Monthly Closes and and assumed an inflation rate equal to the SWR.

        However, using actual historical inflation rates from 1980, the SWR gets even better!
        It is 6.61%
        And for longer than 30 years. For 34.6 year period.

        If you retired in January 1980 with $277,000 in the S&P500 you’d be left with $52,872 ($52,800 is the US’s GDP per capita) in January 2014 after withdrawing roughly $1,200,000 over 34 years.

        I have the spreadsheet for these calculations, if anyone’d like it.

        Thank you so much for all your fantastic articles MMM.

        • Mr. Money Mustache March 8, 2017, 5:51 pm

          If you used monthly closing prices, is it possible you forgot to add in the dividends?

          Including their compounding, dollar-cost-averaging effects, dividends are a massive part of the total return of the stock index. So many people forget them, even in financial journalism. See the MMM reader’s tool called “IndexView”

  • MacBury August 25, 2014, 1:26 pm

    What is the annual cost of the insurance product that will protect you from the ‘ruin’ scenario (where you run out of money before you die)?

    For example if you are 100% invested in S&P tracker and a 50% fall in the next 5 years guarantees ‘ruin’ can you buy a product that pays you X if that happens (put option).

    Or another way might be to sell long dated calls on the S&P against your long position. This would for example cap your gains at say 50% on the upside over 5 years but give you more buffer to avoid ‘ruin’.

    Sell those parts of the distribution you value less to buy protection.


    • Mr. Money Mustache August 25, 2014, 3:34 pm

      That’s a pretty interesting question. I prefer different forms of insurance (lifestyle and spending flexibility, and tending to gain wealth over time – aka living on less than 4% and sometimes less than 0% by earning money). But in theory a person could do increase statistical safety with financial instruments too, if it helped them sleep better.

      • JB September 2, 2014, 8:39 am

        Wouldn’t you just have 5 years of cash on hand to protect against a fall in the market? Nobody can predict any rise or fall of that much in the market.

    • peter October 8, 2014, 9:57 pm

      In my view all those who attempt to protect/hedge their positions end up going nowhere.
      You have to take a bet – Mr. Buffett bets against catastrophic events (collecting premiums from those that do) and uses those premiums to bet against the collapse of the US market (by longing their stock).

      However, the SWR for a 40 year period that ends at the bottom of the Great Recession (March 2009) for someone invested 100% in the S&P 500 is 2.29% This is the lowest SWR for periods between 28 and 40 years,
      For every $100k you would have withdrawn $314k over that 40 year period.
      Your 40th disbursement in March 2009 would be 5.83 times the 1st taking into account inflation (including 13.5% inflation of 1980).

      The highest SWR is 8.02%, for a 29 year period that ends at the bottom of the Great Recession (March 2009) for someone invested 100% in the S&P 500

  • JB September 2, 2014, 8:37 am

    I should be able to take about $80K a year out of just my brokerage account for about 15 years and not touch the retirement money until later. We should have $4M when we retire. $2M in retirement and $2M in non-retirement. Even spending $100K a year, it will take us awhile to plow through the money. I am hoping the market brings it up to $6M by the time we are 60.

  • SNengr September 16, 2014, 3:14 pm

    What a great dilemma I have! When should I retire and how much is enough. I am 36 years old and expect to be able to cover expenses by the age of 41, or have 2x expenses by the age of 47, or 3x expenses by the age of 51.5. Living like a pig on 3x expenses would probably be overkill, but working a few more years at a job I don’t hate would give us a huge buffer. I would rather work a few more years as an engineer, than work as a Walmart greater when I am 70 and broke. There is also plenty of “fluff” in our living expenses now that could be shaved easily if the early years of retirement got rough.
    Maybe I shouldn’t worry about something at least 5 years out. Plenty of things can happen between now and then.

  • grevardo October 28, 2014, 5:35 pm

    Is this 4% also can be use in other country? E.g. in Indonesia, which inflation higher than saving rate.. Want to hear the explanation (sorry for my bad english)

    • Frugal Gopher October 29, 2014, 8:53 am

      You could take the total rate of 7% per year (see above), then, instead of substracting 3% like MMM did, you could substract whatever your country’s inflation rate is. However, I don’t see how your country’s or any other country’s average saving rate is relevant to an individual’s situation. If you want to save more than most Indonesians and you can do it, by all means, do it! :)

  • Matthew December 4, 2014, 4:20 pm

    Mr. Money Mustache, just how do you have your assets allocated between taxable and nontaxable accounts? Are you actually drawing down 4% annually right now? To support yourself and your family? Or are you making enough with side work to not need to do that?

    I’m doing a major rebalance of my entire portfolio. If I’m going to retire early and take withdrawals from my accounts, it seems reasonable to make sure most of money is in a taxable account. I can’t take withdrawls without tax implications from IRAs until I’m 55 and 1/2, and I’m 36 years old.

    Thanks and your blog is quite intriguing.

  • Steve Mack December 5, 2014, 6:50 pm

    Thank you for this, it is very useful information and obviously took a lot of hard work to put together.

    I would like to recommend a book I just finished titled “Build Wealth and Spend It All” by author Stanley Riggs. This was a very refreshing and interesting read, as it takes you on a different course than the typical financial planning book. This book not only focuses on building wealth, but actually outlines plans for, and encourages, spending it! The author has personal experiences with what can go wrong from a life of frugal saving and very smartly teaches us what we can do about it.

    It is somewhat hard to grasp the concept from just a blurb, but reading it has prepared me for my own retirement more than most of the other books out there.

    Check it out: http://buildwealthandspenditall.com

  • Mary Potter December 17, 2014, 5:05 pm

    Thanks for another informative post Mr. Money Mustache. I’d love to hear you weigh in on the topic of annuities. I’ve recently gotten super excited regarding the topic after finding a book on my Kindle called ‘The Annuity Stanifesto’ by Stan Haithcock. Its really informative, quick read, that covers everything annuity. The topic was so overwhelming and complex, I waited far too long to do the proper research on them. But now I’m feeling really motivated and even reached out to Stan himself via his website (check it out http://www.stantheannuityman.com). A loyal Mustachian, excited to take that limo ride to the party, signing off.

  • chue December 27, 2014, 2:21 pm

    Interesting post, but I am struggling with the results from the FireCalc site. First I tried a 5% withdrawal rate ($1M portfolio, $50k withdrawal, 50 years), and the site showed a 0% failure rate. A 5% withdrawal rate is in line with your article above, so no big surprise that there isn’t a failure.

    So then I tried a 10% withdrawal rate: ($500k portfolio, $50k withdrawal, and 50 years). This results in no failure. I though that was interesting, so I tried a 50% withdrawal rate ($100k port, $50k withdrawal, 50 years). Still no failure.

    Am I missing something?

    • Ralph December 27, 2014, 8:19 pm

      starting on page: http://www.firecalc.com/index.php

      In the Start Here block, I put in 50000, 1000000, 50 years and hit submit and got a new screen [FireCalc Results 3.0] that showed a graph and said there is a 51% success rate.

      • chue December 27, 2014, 8:34 pm

        Hmmm it seems to work now. I guess I’ll chalk it up to user error. Thanks for the help!

    • Noriko March 20, 2015, 1:45 pm

      I’m also having trouble with it. I tried using my real numbers and it showed a 100% success rate. So I tried playing around to see when it’d start to be risky. It never went below 100% success. Even at $50,000 spending and $20,000 portfolio over 60 years. I’ve tried a bunch completely insane numbers and still 100%. I wish they would guarantee these results! ;)

  • Luke Horton January 10, 2015, 10:08 pm

    I’ve skimmed through all the comments to see if this has already been answered, but to no avail. Forgive me if it has been and I missed the answer…

    What, specifically, are the accounts from which you use the 4% withdraw rate? Do you save into the 401k, then convert it (at a 4% rate) to a Roth IRA and withdraw from the “roth pipeline”? Do you build up a taxable account and withdraw from that at 4% too?

    In my own personal finances, I find that I would have a very hard time living solely off 4% of the taxable account, even after 15 years of building it up. However, if I withdrew using the roth pipeline + taxable accounts + some side income (from odd jobs, fun work, etc.), I could make things work. Is that the strategy here, or am I missing the boat?

  • Sam Abbitt January 30, 2015, 8:11 pm

    Hey MMM,

    Great article! Love the 4% rule and fantastic explanation! I think that the firecalc.com link in your article throws off the results for people who click through from your site. I was getting bad results from firecalc until I cleared the link you provided and just entered “firecalc.com” into my browser. Might want to fix that here on your page.


  • Jason Z February 26, 2015, 7:15 am

    Hi MMM,

    So if you have $625000 and with 4% withdraw every year you have $25000 to spend. But $25000 next year will not the same as $25000 this year. There’s inflation right? Have you taken this into account? I’m just a finance beginner here. Maybe I missed it somewhere in the post. I would really appreciate it if you could clarify a bit. Thanks.

    • Mr. Money Mustache February 26, 2015, 4:49 pm

      Hi Jason,

      The idea is that the $625k will grow (or pay dividends) by about 7% before inflation on average. Let’s express it all as just appreciation to make it simple.

      Since you spent 4% of it over the first year, you left the remaining 3% of the growth in there to reinvest.
      – So next year the savings have grown to $643,750
      – And you’ll be able to withdraw 4% of that the next year, which is up to $25,750

      So your $25k allowance automatically rises to keep up with inflation. And if you do your job well, you will gradually be able to spend LESS over time as you develop better spending efficiency skills. And you might earn more as well. This compounds into a rapidly escaping surplus.

      • KP February 26, 2015, 6:36 pm

        Mr MM,

        Great blog and thanks for all the great info too. I’ve played around with the math, and the 4% rule definitely seems to work. However I do have another question in regards to inflation. If I were planning to spend $25,000 per year in retirement, I would need $625,000. That makes sense. However, if I were planning to retire in 10 years, would I need to adjust my $25,000 per year for inflation by increasing by 3% for 10 years? So 1.03 to the power of 10 = 1.34 and 1.34 x $25,000 = $33,500. So my $25K per year lifestyle will actually cost me $33.5K per year in ten years won’t it? Thus, I would need $837,500 (25 x $33,500) to retire when I adjust for inflation wouldn’t I?

        • Mr. Money Mustache March 4, 2015, 8:00 am

          Hi KP,

          Inflation is already accounted for in the 4% rule. Since the top-line growth including dividends is around 7%, you leave 3% in there to grow and expand the pool with inflation, and spend the other 4%. This allows you to take out $25,000+3% in the following year and so on, so your spending power remains constant.

      • Jason Z March 9, 2015, 7:05 am

        Thanks for the explanation Mr MM :) I have a follow-up question:

        If I have 625K this year, I can retire now. But if my goal is to retire in 5 years, I will need 625k * 1.03^5 , so about 725K. Is this right?

        • KP April 13, 2015, 5:17 pm

          Jason, I think the answer is yes – and you actually found a simpler way to ask the question that I was trying to ask – maybe I got too wordy. Let’s see what MMM has to say.

        • Kreupelgeld April 15, 2015, 7:09 am

          If you have 625k this year this will compound to 625k * 1.07^5, so about 875k in 5 years. With 3% inflation your 25k will be 29k in 5 years. 875k @ 4% would give you a (possible) 35k per year.

  • Philip Terry March 9, 2015, 12:41 am

    An 85% stock and 15% gold distribution of wealth leads to 99% success over the last 115 years with a withdrawl rate of 4%. See this excellent calculator based on firecalc that allows bond/gold/cash percentages.

  • Jeff K March 20, 2015, 7:18 am

    You said “If you use the number 25, you’re implicitly using a 4% Safe Withdrawal Rate”. I don’t understand how the two are related, can someone please explain?

    • Mr. Money Mustache March 20, 2015, 7:04 pm

      Hi Jeff.. this is because 1/25 is 4%. If you live off of 1/25th of your amassed savings per year, you are spending 4% per year. If you have it invested well, it will kick off MORE than 4%/year of dividends and appreciation, so you’ll (approximately) never run out of money.

  • faramund April 12, 2015, 11:55 pm

    I think I am correct in assuming that the N% rule assumes that you will withdraw N% in the first year, and then increase it with inflation (and then the test is too see what probability there is that it will last some given number of years).

    In contrast, if you just say N% per year, and then adjust it up and down each year, then it will last forever (but it may get very small) – so then the question is, what is the biggest decrease in spending you may have to do. Which seems about 50% given the crashes for the Great Depression, 70s and GFC.

    But as long as you can reduce your spending if necessary – then you can more safely retire on N%.

    My stash currently generates just over a 4% dividend, so I’m just planning to live off those dividends, with the added bonus that dividends decline less in a recession than stock prices.

  • intrepid August 9, 2015, 9:52 am

    There is a corollary to the 4% rule that was touched on briefly by Ken, above, that I’d like to expand on.

    The idea is that a part-time job in retirement (presumably doing something that you enjoy doing and that enriches your life) paying $10,000 is the equivalent of having an extra $250,000 in retirement savings, since 10K is 4% of 250K.

    I have realized that the same calculation can be applied to any savings/spending situation. That $1 lottery ticket equals $25 in the retirement fund. Foregoing that $10 bottle of wine is worth $250. Paying $5,000 for a car instead of $25,000 is like adding half a million to your retirement fund.

    Of course, all this assumes you are actually saving these savings, rather than shifting the money to other purchases. Still, I find thinking about my spending this way to be motivating.

  • David P September 3, 2015, 5:15 am

    Has anyone ever heard or used a monthly recalibration of the 4% rule? You hear the mainstream Financial Press state that in today’s low interest rate environment, 4% is too aggressive and there’s a good chance you’ll run out of money. MMM consistently refutes this argument by illustrating future changes in consumption, other money making opportunities, social security, etc.

    What if you recompute a 4% amount and divide by 12 (number of months in a year) every month? Your monthly cap amount would go up and down with the market but you would never run out of money and you could adjust your spending/income accordingly. Besides never running out of money, making adjustments monthly would be easier to manage as opposed to finding out at the end of the year that you have way overspent due to a big market adjustment.

  • Matt September 4, 2015, 6:03 pm

    David P
    You asked about a monthly recalibration of the 4% rule. I guess that makes sense. I also wondered about the use of the 4% rule as written by so many people. I found Paul Merriman on the internet and you should check it out. He has done studies with a well diversified portfolio and shows how 4, 5, and 6 % fixed and flexible withdrawal worked out since 1970. It gives me confidence to use the 4% flexible and take the 4% out at the beginning of the year when you rebalance. He puts that money in the bank and lives off it till next January 1st. He has an article about the over saver and that is the person most benefited with flexible. If you just saved enough than maybe fixed is better. But check out paulmerriman.com he has good research. You would not overspend because your income is based off previous years balance. If markets do very well and you have a big bump in income just set that in a bank account to the side for lean years. Paul talks as if you would do just as well spending that larger income. Just depends on other income sources and how much money you want in your estate. The figures at the end of that 43 year period are something.

    • David P September 23, 2015, 4:26 am

      Thanks Matt for reminding me about the Paul Merriman article. He does have some nice simulations of different withdraw rates. In a recent post from MMM, Go Curry Cracker does another simulation of a 1965 retirement (worst possible year) and shows how to avoid running out of money by adjusting withdraw amounts.

  • Andy September 26, 2015, 10:08 am

    With $20k expenses, $500k is enough to retire according to post, assuming invested mainly in the stock market. However, the stock market has dropped 50% TWICE just the last 15 years and will likely do so again in the future. Is $500k the necessary capital required at the bottom of a bear market or the peak of a bull market?

    If $500k is needed at a bear market, you actually need a million if your timing is unlucky.
    If $500k is needed at the top, you actually need just 250k at the bottom.
    Or maybe I´m just stupid…

    • Mr. Money Mustache September 27, 2015, 12:48 pm

      Hey Andy – what the Trinity study figured out is “can your investments survive in the WORST case – you retire at a peak of the stock market and experience a crash right afterwards”

      So unless conditions in your own retirement end up being worse than the record from the period of the Trinity study, you’ll probably do very well with a 4% withdrawal rate.

  • Bill October 2, 2015, 10:01 am

    Neat firecalc calculator. It shows that excluding my house value altogether from my portfolio (but including what I still owe on it), at my current savings rate, and a hugely generous spending rate of 55k/yr (my current budget – mortgage payment is barely that), I reach 100% in 2021. That’s awesome. I can retire in 6 years without even getting frugal(er). I can’t wait to see what we can accomplish with frugality.

    • Chris April 11, 2022, 10:06 pm

      Hope you made it, Bill!

  • Casey October 27, 2015, 7:48 pm

    With a wife and two kids you can have an AGI of 102,000 and have an taxable income under 73,800$ pay zero taxes to Uncle Sam through capital gains or qualified dividends or real estate. So why would you retire on 25,000 a year? You pay all that money for an education and work all those years to get a good job. You don’t become a frail old man at 30 or 40.

    Being out in the world and working is good for you anyway. Plus your contributing to the economy. Pulling out 25k a year from your stock portfolio isn’t really contributing lets be real here. Maybe you guys are all creating non-profits and working that way or joining the peace corps.

    • Mr. Money Mustache October 29, 2015, 5:06 pm

      Agreed Casey – working is good for you and still one of my favorite things to do. It’s just more fun on your own terms with money out of the picture: http://www.vox.com/2015/7/27/9023415/mr-money-mustache-retirement

      While my post-retirement income has often ended up much higher than $25k/year, $25,000 is about the most I can manage to spend. If you look around and read more articles on this blog you’ll get a more complete picture and maybe some significant benefits for yourself.

  • John December 23, 2015, 12:32 pm

    Am I missing something here? What about the person who has dutifully lived below his means, has no children, saved a million with a wife who has half that plus a pension? Such a person can use the 4% SWR from age 58 on just from the saved cash, with no market risk. Especially since they don’t need to leave an inheritance to anyone. And this isn’t even factoring in SSI.

    • Dōitashimashite December 23, 2015, 1:14 pm

      Yes this is possible, even likely for some readers here. I guess the answer for you here might be you could quit work earlier, I.e. You “saved too much”, as Yogi Berra might say. The 4% rate is the long term traditional safe rate of value increase after inflation. If you pull out more, the risk is that your spending power will slowly decline, either from inflation or less optimistic investment returns. If you spend less than 4%, you will likely be a net saver, your spending power continuing to increase over inflation.

      Yes you could switch to safer investments, or just put cash under the mattress if you are rich enough and your spending needs are low enough, but you could continue to save and invest optimally and do something great with your money. Buffett certainly will never spend his billions on himself, and he specifically will NOT allow his children to inherit his wealth beyond a token amount. So he thinks a lot about charity.

  • Paul Centro February 25, 2016, 10:43 am

    Just saw the New Yorker piece. Interesting. I’ve been doing this my entire life without thinking about it. I would suggest that there is only one rule: Live beneath your means. If you’re thinking about money at all on the spending side you’re giving up a lot of psychic energy for no reason.

    I may have worked longer than was strictly necessary but one cannot discount the strategy of being massively over saved. That way the black swans can do what they please and I am beyond worry. I can putter for walking around money and social interaction and draw 2% off the nest egg. I like that withdrawal rate even better.

  • Craig February 25, 2016, 1:25 pm

    Hi MMM,

    Hyperbole aside, your blog has literally changed my life. Thank you for showing me The Way. My wife & I were both pretty frugal (saving more than 50% of our earnings) but now we feel reborn with badassity. My question is about 401ks. My wife & I make roughly the same amount (100k+) and are both contributing to our company 401k plans. I maxed mine out since my company matches contributions but my wife’s company does not. She is currently contributing 9%. The rest of our savings (besides $15k in our regular savings account for “emergencies”) is being invested in a balanced Vanguard Index Fund (VBIAX). Does it make sense for my wife to stop contributing to her 401k and put it into our Vanguard account? My wife is 27 and I am 43. Thanks so much for all the great advice & please don’t retire this blog until I’ve recruited all of my friends & family! P.S. I just finished reading “The Good Life”. Excellent read!

  • Jackson March 1, 2016, 4:42 pm

    MMM or anyone –
    Has there been a thread about calculating expected medical costs as part of retirement planning? IF any of you are healthy AND have an HSA there is an interesting article (‘sorry don”t know the title and don’t have a link ) by Michael Kitces which makes a strong case for using a high deductible insurance plan combined with an HSA (health savings account) for covering medical costs in retirement.

    Both contributions and withdrawals from an HSA are not taxed. That seems a huge benefit to me.

    While HSA contributions can only be used for medical expenses, the average person spends well over $200,000 on medical expenses during the years in retirement- closer to $245,000, according to some estimates! And that is for expenses NOT picked up by Medicare. I can provide links for those ststistics,if desired.

    I wonder how many here are calculating retirement costs with medical expenses factored in? I saw them soar for my parents – who were financially fit before their health declined.

    The advantage of an HSA is the fact that not only are contributions in pre-tax dollars but so are withdrawals – even if years down the road! And in some cases HSA contributions can be used to pay premiums. HSA contributions also roll over from year to year and can grow a great deal over the years..

    So, according to Kitces, an HSA can help make the most of retirement funds needed for medical costs.

    Here’s the rationale for using a high deductible plan and an HSA – if that option exist for you:

    1. If you are in good health, you should have minimal medical costs per year . You do pay premiums but premiums forms high deductible plan are lower than premiums for a low deductible plan.

    2. If able, you cover any medical costs yourself rather than use the HSA – and hopefully medical costs are minimal due to good health.

    3. You let the HSA contributions continue to grow and roll over from year to year . Think of the contributions as similar to a Roth for medical costs – but even better because contributions AND withdrawals are in pre-tax dollars . As an example, we could have contributed $7,000 to an HSA but we simply didn’t have the funds – or the health status – for a high deductible plan. I sure wish we did!

    4. But if you are luckier than us, you put as much as possible into the HSA, and if you are lucky enough to be able to save the max allowed in an IRA, Roth or regular IRA, etc, you can still contribute additional funds to the HSA. Think of it as medical insurance for down the road – but without premiums or tax consequences. Again, withdrawals are NOT taxed.

    5. You can use HSA funds to cover much those Medicare costs which are not generally covered, This may include premiums but NOT Medigap insurance. And those funds are not coming out of your taxable income.

    What do any of you think about using HSAs to supplement the 4% draw, build non-taxable savings for medical costs and protect otherwise taxable savings in retirement? And believe me, odds are high that you WILL spend a significant amount of money – sooner or later- for medical costs- if you live long enough,

  • Rachel Hershberg March 1, 2016, 11:14 pm

    I am not financially-minded, not so naturally adept at doing the breaststroke in these types of calculations. At the same time, I am baffled by the idea that it takes a genius to determine how much money a person or couple will need for retirement. What isn’t self-evident about look at your current budget, remove costs for education for the kids and the mortgage that will be paid off, and multiply by how many years you plan on living retired?

    • Mr. Money Mustache March 2, 2016, 6:56 am

      Hi Rachel,

      It sounds like your calculation method is based on the “Cash stuffed under the mattress in an inflation-free environment” approach. It would still give you approximately the right amount of money for short time periods, but beyond 10 years it works out better to have the money invested in something that delivers passive income.

      For example: is it better to start with $100,000, spend it down at $10k per year, and then be broke in year 10? Or buy a $100k rental property that yields $10k per year in rental income, and live off those payments forever? That’s investing in a nutshell.

  • midas March 22, 2016, 4:15 am

    How is the expected 7% return influenced by the global economy’s rate of growth?
    What happens when large, emerging economies mature and cannot raise the average economical growth? (Think <1% all across the board)

  • Paul April 27, 2016, 4:45 pm

    I don’t get the inflation part. If I withdraw my yearly dividends once I retire, the inflation will still creep up: with 1 million $ in the bank, withdrawing $40K in 2060 vs $40 in 2040 will buy me less due to inflation. This doesn’t make sense.

    • Mr. Money Mustache April 28, 2016, 8:41 am

      Hi Paul, the thing you’re missing is that the remaining money will still grow equal to or faster than inflation. $1 million becomes $1.08 million in the first year. You spend $40k, leaving behind $1.04 for the next year. Your withdrawals can continue to grow since the principal keeps growing.

      • Paul April 28, 2016, 5:13 pm

        Got it, thanks!

  • Ben June 5, 2016, 2:27 pm

    Could I get clarification on something? By assuming your invested nestegg will continue to return the 7% returns needed to support your living off 4% of the nestegg, does this mean that MMM recommends keeping your nestegg completely in stocks opposed to the traditional school of thought where you shift your asset allocation to a ever-higher percentage of bonds the closer you move toward retirement?

  • SH June 6, 2016, 11:43 am

    Posts like these usually make my brain hurt. (I have a tough time figuring Financials) But this one makes sense.

    After finding your Blog in January and reading random posts. I realize my hubby and I are on a good path as we are set to retire in 7 years (putting hubby at 51 and me at 47) we could do it earlier ( we are mortgage free and have about 400K in investments) but he wants to say he did 35 years in the mechanical industry twisting wrenches and then owning a successful business.

    We have always questioned just how much we will need when the time comes this defiantly helps put our mind at ease.

  • Edgar July 24, 2016, 1:21 pm

    Hello. I am hoping someone could help clarify one thing for me. How do we actually access the money? By that I mean, I have the great majority of my money tied in retirement accounts which penalize me from using them this early. So if we hit our target of 25, but most if not all of the money is in retirement accounts what should someone do? What would you recommend?

    But as an aside, we are in full force in making our way to 25 times our expenses by end of 2019. So while I have time, this is my biggest obstacle in getting my wife 100% on board – she is 90% there.

    Thank you everyone for your help in advance.

    • ben bienow July 27, 2016, 6:14 pm

      Say 75% of your money is in a non-retirement account and 25% is in a retirement account that can’t be accessed without penalty. You can still withdraw 4% of your TOTAL investment balance. You’ll be taking more than 4% from your non-retirement accounts, but your retirement accounts will still be sitting there growing.

  • Kris July 27, 2016, 3:53 pm

    I’m confused by the idea of living “forever” on the 4% rule. What am I missing?
    Take the example of having 1 million dollars and removing 4% each year while earning 4% each year (assuming an ideal situation with no bonds, only stocks that are at 6.5% return with 2.5% inflation). That gives us:
    (1000000 – 0.04(1000000))*1.04 dollars left after year 1, which is 998400. This total nest egg or stash continues to decrease every year even in this ideal situation. That gives us a limited time to live off this money when one is talking about decades ahead of life and assuming no bonds or cash for safety. Right?

    • higginst July 27, 2016, 4:03 pm

      Your calculation assumes that the 4% return is taken all at once at the beginning of the year, while earnings only happen throughout the year. In reality, small withdrawals through the year at a rate equal to the return you earn thought the year should lead to no change in the principal amount

      Even more simply, think about if you wait one year: You have $1 million, and then it earns $40,000 over year one. Now you have 1,040,000. At the beginning of year 2, you withdraw the $40,000. Now you have $1 million still earning. You live off it for the withdrawn $40,000 for the remainder of year 2 and by the end, your investment is back up to $1,040,000.

      Your confusion just comes from differences in the timing of payments. Realistically, with fluctuations in withdrawals and earnings, the principal balance would increase and decrease at various times, but remain unchanged in the long term.

      • Chris July 27, 2016, 4:31 pm

        The ‘forever’ part come from earning 6.5% and withdrawing 4%… therefore both your principle and subsequent 4% withdrawal both keep increasing with inflation … forever.

  • Bfinleyrad September 8, 2016, 12:09 pm


    In theory, shouldn’t your retirement savings be 25 times your inflation-adjusted future annual expenses? If I were planning on retiring in 20 years (when I’m 44) wouldn’t I want use what I think my annual expenses would be today ($25k for example) and increase it to account for 20 years of inflation (the $25k would then become $45k)?

    You can say this is covered by all the overly conservative estimates that are within the 4% rule (and I would generally agree) but I think it’s still worth mentioning to make your statements fully accurate.

    • Mr. Money Mustache September 11, 2016, 10:57 am

      Good question Bfinley. The answer is yes: at the exact moment of retirement, you need your investments to be about 25 times your planned spending at that exact point.

      However, inflation is currently very slow, and for many people expenses actually drop during their savings period as they become more efficient. Thus, the ideal plan is simply to not try to predict too far into the future. Just work hard, save hard, and when you get close, look at the numbers in more detail.

  • CC October 4, 2016, 10:22 am

    Sorry if this has been asked before, but when you talk about taking 4% of savings (dividends, gains, etc.) does that mean solely after-tax investments/savings accounts? If you’re including retirement accounts as well, I would think the total would dwindle down much quicker if you’re paying taxes on the money each year as well as early withdrawal penalties. Thanks for helping me clear this up!

  • Marc October 10, 2016, 3:54 pm

    Hey, I have looked at your graph for amout saved vs years of work to achieve F.I. If I can save %65 of my income I can retire in 10.9 years? Is that %65 of my take home pay? Should I exclude 401k contributions from that figure? I try to max out my 401k, but perhaps I should only donate enough to get my employer match? I hope to retire around 40 if all goes well, so I’ll need enough to last me 19 1/2 years before I can get to that money. Just wondering how much to save, and how much to put in the 401k. My employer also offers a cash bonus, and profit sharing which is put into the 401k.


    • Mr. Money Mustache October 10, 2016, 4:52 pm

      Hi Marc – yup, overall you have the right idea (except you should keep maxing out tax-deferred accounts). Here’s an article with some answers to your other questions:

    • Scott October 10, 2016, 6:50 pm

      Hey Marc,

      Good news. If you are retired the IRS will allow to withdraw from your 401k at age 55. So if you retire at 40 you can drop that 19.5 years down to 14.5.

  • JMA November 14, 2016, 5:40 am

    4% Rule and Trump?
    I’ve been happily reading along and planning my early retirement. One thing we can all count on as we age is increased health issues–even the healthiest among us will have health issues, sometimes very expensive ones, as we age. I wasn’t too concerned about this given my savings and Medicare, but Paul Ryan/Trump’s plans to cut Medicare and replace it with a voucher system leave me very concerned–especially if I develop a pre-existing condition along the way. It doesn’t seem like the Trinity Study upon which the 4% rule is based accounts for this scenario–rising health care costs as we age and a gutted Medicare system that make it very difficult to forecast yearly expenses as we age. Any thoughts? In particular, does anyone know of a similar study from another country that doesn’t have a reliable Medicare-type system where the 4% rule still holds as we age?

  • Zack November 20, 2016, 8:30 pm

    I currently am the only one working in a family of three (seven month old baby) making 27k a year. I fight with my partner about how we need to save for retirement because we currently have absolutely nothing. I am 30 years old. How can I possibly save 500,000 dollars when all I can sneakily squeeze out is 500 dollars a month for savings?

    • Aisling McCarthy November 26, 2016, 6:13 pm

      Hi Zack It sounds like you are doing well living on a similar amount to MMM. However, by looking through the past posts you might be able to cut down a bit while you are in savings mode. It sounds like your logical next step is finding a higher paying job and/or a side gig to speed up your savings. MMM has some good posts about this. Getting your partner on board so they are with you on the Journey also sounds like an important first step. Good luck!

  • Eric February 12, 2017, 10:44 pm

    Does the 4% withdrawal rule assume a recalculation monthly? Wondering if a monthly calculation would increase odds of success over say yearly?

  • grlaeris February 17, 2017, 2:11 pm

    I have a very basic question about the 4% rule. Assume I have $1 million and i’m ready to retire. In theory, at the end of year 1, I would have $1,070,000 because of the 7% rate of return. If I assume 3% is eaten up by inflation and I withdraw another 4% then my ending balance will remain at $1 million. If these assumptions are correct (on paper), then after 30 years, wouldn’t my balance still be $1 million?

  • Homesteading Pharmacist February 19, 2017, 12:56 pm

    Hi there MMM,

    I’ve been pursuing your blog on and off for quite a few years. In that time I’ve paid off student loans, moved to a smaller rural area (unfortunately, higher cost of living and from a state with no income tax to one with quite high income tax, but the quality of life is better). Me and my husband have bought for and paid off a large property. We have no debts. Life seems grand. I had a child last year and now lots of things are being reconsidered in how to proceed and spend the most time with my family I can.

    I have a few questions you may or may not want to give your two cents on, but here’s some further background first. My situation is a little different than most being that I’m the wage earner, and my husband is 20 years older than me. He had very little retirement savings, for practical considerations we’ll call it none.

    Now I would like to be able to spend as much time as I can with him, but especially with our child which we plan to homeschool. I’m at a bit of a loss trying to decide the best way for me to go about that… I don’t mind working and would be ok working again when I’m older (it’s hard not to be ok with working SOME when I make 60+/hr). Given my field I also need to stay in the game a little bit.

    On to my questions kind of;
    The house is paid off. I’ve currently got about 120k in 3 different retirement plans (2 active, one inactive, outperforming the actives). I have another 90k in betterment accounts (some of this is intended to be child’s college/travel the world/who friggin knows fund) with auto deposit back on after taking significant time off first first year of babies life. We’ve got 12k or so in my husbands betterment TRAD IRA. I max out my HSA Account and have another 15k or so left after baby. Not including the house pur net worth is around 350-400k. Not including cars/tractor/real possessions (consequently, in our 1100 SF house, now with a baby, we’re attempting to liquidate some of the possessions and free up space, and hopefully some cash too).

    OK- back to the meat of the questions… I’ve been trying to max out my tax advantaged accounts which comes to about 30k/year. I haven’t been working full time since paying off the house. My pretax income has been around 100k. 100k-30k to tax accounts — 70k (-30kish living expenses) —> 40k to savings (or, this year for example, 20k, since we will need 20k of new roofs to structures on our property. It’s rains FEET per year here. We need a professional).

    At 20-40k per year saved, that’s still 15-20 years of savings until early retirement to hit 625k to live off to provide enough for annual living expenses without dwindling down “the stash” before I can access MY retirement accounts. Of course I put the max into the spousal IRA for my husband and well put more in when he reaches catch up age.

    So that’s where my thoughts are right now. But I keep stashing away every bit I can. My favorite past time since I was young has been to watch that money hoard grow!

  • ben March 6, 2017, 9:37 am

    I heard the interview with Mr. Money Mustache and Tim Ferris and was wondering how this works..

    The 25x has to be in pure savings right, not a 401k since that cannot be tapped without penalty before 65+?

    Also all the money is assumed to be invested in an index fund?

    Finally isn’t end-of-life assisted living very expensive? i.e. 5k/month? Does the 25x account for all that?

    • Mr. Money Mustache March 6, 2017, 5:09 pm

      Nope, the 25x includes your 401k and IRAs too. Search for my other article called “how much is too much in your 401k” for more details!

      I wouldn’t plan explicitly for assisted living, other than focusing on lifelong health, frugality and productivity. Your lifelong surplus is likely to grow if you life this way, which is really the best insurance plan.

  • DSpence March 7, 2017, 6:15 pm

    What about the possibility of hedging stock market volatility with annuity products, which can provide a guaranteed income for life? The investment risk is shifted onto the annuity company. While age is a factor in the guaranteed income payout, can’t it be part of the solution?

  • Jerome B March 21, 2017, 11:39 am

    Wow , it means i could retire right away ! I love it !! I just might stick with my job a while longer (i enjoy what I do) but it makes me feel very good knowing I hava enough stashed away !


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