Early Retirement Info
Plan your path to Financial Independence (FIRE)
The 4% Rule
A popular rule of thumb in retirement planning is the 4% Rule (or 25x Rule). It states that you can safely withdraw 4% of your portfolio in the first year of retirement, and adjust that amount for inflation in subsequent years, with a high probability that your money will last for 30 years.
Estimating Expenses
Most experts suggest you'll need 70-80% of your pre-retirement income to maintain your standard of living. Expenses like commuting and saving for retirement disappear, but healthcare and travel costs typically rise.
The Impact of Inflation
Inflation is the silent killer of purchasing power. A $3,000 monthly expense today could easily become $9,000 or more in 20 years. This calculator automatically adjusts your target corpus based on your expected inflation rate.
Common Retirement Mistakes
- Starting Late: The power of compounding works best over long periods. A 10-year delay can double the required monthly savings.
- Underestimating Healthcare: Medical costs often rise faster than general inflation. It's wise to have a separate buffer or Health Savings Account (HSA).
- Taking Too Little Risk: While safety is important, being 100% in cash or bonds early on might lead to returns lower than inflation.
Where to Invest?
To beat inflation over the long term, a significant portion of your retirement corpus should typically be invested in diversified index funds (like S&P 500) or Target Date Funds during your accumulation phase, shifting gradually to more stable bonds as you approach retirement.