I thought the 4% thing was more like assume that returns are 7%+ and inflation is 3%+. You have to leave that 3%+ in so that your base doesn't change (ever) and so that only leaves you 4% to withdraw. There's no "and then spend it all down" part.
However, the experts say to calculate the 4% based on how much you had the very first year, and then pull out a little more than that each year due to inflation, and so long as the market doesn't plummet during your early years, you'll probably be okay. Because people are too inflexible (living paycheck to paycheck the way we so adore) to have their actual incomes go up and down with the market.
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Yes, I do think that eighty is the new sixty-five, but I still don't want to wait that long if I can manage it. It's one of my very few expensive goals in life.
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ninetydegrees
no subject
on 2007-03-03 03:33 am (UTC)I thought the 4% thing was more like assume that returns are 7%+ and inflation is 3%+. You have to leave that 3%+ in so that your base doesn't change (ever) and so that only leaves you 4% to withdraw. There's no "and then spend it all down" part.
However, the experts say to calculate the 4% based on how much you had the very first year, and then pull out a little more than that each year due to inflation, and so long as the market doesn't plummet during your early years, you'll probably be okay. Because people are too inflexible (living paycheck to paycheck the way we so adore) to have their actual incomes go up and down with the market.
**
Yes, I do think that eighty is the new sixty-five, but I still don't want to wait that long if I can manage it. It's one of my very few expensive goals in life.