23: How Much Money Do you Need for Retirement (Does the 4% Rule Really Work?)

Girl on FIRE

🎙 The 4% rule is a common rule of thumb used by financial experts for decades to determine how much money you need for retirement. But it’s not necessarily the best advice for a number of reasons, especially when you’re aiming to FIRE and retire many years earlier than traditional retirement. So why doesn’t the 4% rule work? And how do you then determine how much money you need to be able to retire? 🤔

This episode discusses topics like:

🌟 The biggest problem with the 4% rule that many financial experts overlook;

🌟 Why the 4% rule isn’t the best tool to determine how much money you need for early retirement; and

🌟 How to calculate your FIRE number.

Links from this episode:

Episode transcript and show notes: https://www.papermoneyco.com/23-4-rule-retirement

The 4% rule of thumb for retirement withdrawals: https://www.thebalance.com/dont-confuse-these-two-retirement-rules-of-thumb-453920

How to 4% rule works in retirement: https://www.thebalance.com/what-is-the-4percent-rule-in-retirement-2388273

Aussie HIFIRE: The 4% rule in Australia: https://aussiehifire.com/2018/11/21/sequencing-risk-the-trinity-study-and-the-4-rule-in-australia/

Life expectancy at birth in 1998: https://www.cdc.gov/nchs/data/nvsr/nvsr48/nvs48_18.pdf

Wade Pfau: Retirement Researcher: https://retirementresearcher.com/the-4-rule-and-the-search-for-a-safe-withdrawal-rate/

Time codes:

00:00 Hello and Welcome!

01:49 What Is the 4% Rule?

05:14 Drawbacks of the Trinity Study and the 4% Rule

15:35 FIRE and Investment Calculator Spreadsheet

17:30 Portfolio Asset Allocation

25:07 How Priya Determines How Much She Needs for Retirement

31:16 Next Weeks’ Episode

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The advice shared on Girl on FIRE is general in nature and does not constitute financial advice. The information shared does not consider your individual circumstances. Girl on FIRE exists purely for educational purposes and should not be relied upon to make an investment or financial decision.