Determining your retirement number is the most crucial step in wealth planning. This target represents the total investment portfolio required to support your lifestyle without ever needing active employment income again.
The 4% Rule and Multipliers
The Trinity Study established that a portfolio composed of stocks and bonds has an extremely high success rate of lasting at least 30 years if you withdraw 4% of the initial balance in year one, adjusted for inflation in subsequent years. To find this number, estimate your annual expenses in retirement and multiply by 25.
If you want to build a more conservative cushion, you can use a 3% or 3.5% withdrawal rate instead, which equates to multiplying your annual expenses by 33 or 28 respectively. This ensures your nest egg survives longer market cycles.
Run your own numbers
Use our Retirement Number Tool to see how these principles apply to you.