The 4% rule tells you how much you need to retire
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Your 2-minute guide to demystifying money and making you richer
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As of Monday morning
The 4% rule
When people ask, “How much money do you need to retire?” The usual answer is, “it depends upon your individual circumstances”.
That, obviously, is incredibly unhelpful.
Luckily, there is a way to figure out exactly how much you, personally, will need using a simple formula that works for everyone:
Calculate your annual expenses.
Assume you’ll need 25 times that amount, for 25 years.
(This sounds like a lot — how the heck are you going to save 25 years of expenses?! But remember that you’re going to benefit from the gains on your investments along the way, tax breaks on your investments, and you’ll get help from the state pension.)
Assume you will draw down 4% of your savings every year. (Because 100% of …