Do You Use the 4% Rule to Set Your Investment Goal?

Tiger_comments
06-20
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In yesterday's livestream, @谋定后动 mentioned the 4% Rule for wealth freedom.

Wealth Freedom Goal = monthly expenses × 12 months ÷ 4%

The 4% Rule is based on the assumption that withdrawing 4% of your savings each year will allow you to live off your investments without exhausting them too soon.

Do you agree with this principle?

  1. Calculate Monthly Expenses: Determine how much you spend each month.

  2. Annualize Expenses: Multiply monthly expenses by 12 to get annual expenses.

  3. Estimate Required Savings: Divide annual expenses by 4%.

Example:

If your monthly expenses are $10,000:

  1. Annual expenses = $10,000 × 12 = $120,000

  2. Required savings = $120,000 ÷ 0.04 = $3,000,000

This means you need $3,000,000 to live off 4% of your savings annually, achieving financial independence.

But it’s important to note that we should adjust for inflation. People in Singapore may need a smaller percent like 3% rule.

$Tiger Brokers(TIGR)$

How do you set your investment goals?

Do you agree with the 4% rule?

How’s your investment goal going?

Leave your comments and also post to win tiger coins!

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Comments

  • icycrystal
    06-20
    icycrystal

    sometimes, you can plan all you want and then poof... life turns you upside down and inside out...

    most months always have something coming up and need to fork out more [Allin] [Allin] [Allin] for either this or that [Facepalm] [Facepalm] [Facepalm]

    money no enough [Facepalm] [Facepalm] [Facepalm]

    how to plan like that [Glance] [Smug] [Thinking] [Victory] [Helpless]

    @rL @LMSunshine @koolgal @GoodLife99 @Universe宇宙 @Shyon @Aqa @SPACE ROCKET @HelenJanet @TigerGPT

    How do you set your investment goals?


    Do you agree with the 4% rule?


    How’s your investment goal going?


    Leave your comments and also post to win tiger coins!

    • icycrystalReply谋定后动: 
      thank you for your comment. just tough at times especially when portfolio is in the red and wonder if should dca. important to invest in the right stock to have good returns and dividends
    • 谋定后动: 
      其实4%原则已经预留了一些意外的空间了，美股+美债的年化收益可以到6%左右，这时候拿出4%开销，还有2%左右的盈余
    • SPACE ROCKETReplyicycrystal: 
      Same hais. Have to earn money the hard way 😞
    • icycrystalReplySPACE ROCKET: 
      life like that... [Facepalm] [Facepalm] [Facepalm]

      why am not born rich [Doubt] [Doubt] [Doubt]

    • SPACE ROCKET: 
      Agree with you lei! Sometimes thought can finally save money, then shit happens! Not things spoil need repair or replace, then kids or dog sick need pay med bills or hospital bills. Full of shit one lei. Very annoying. Like forever cannot have a big amount of money to stash away de.
  • setia100
    06-21
    setia100
    To adjust for inflation using 6% rule is wrong ❗You need 2mil to live off instead of 3mil when you divided your annual saving by 6%❓🤓
  • Aqa
    06-20
    Aqa
    🔥🔥 Totally agree with FIRE — Financial Independence, Retire Early as my goal. Start growing wealth early. Build a portfolio large enough to sustain spending with inflation- adjusted withdrawals equal to 4% of the portfolio's initial value—the so-called 4% rule or any other percentage depending on the rate of inflation. Basically it is all about ‘earn more, save more, and invest more’. 🏖️🏖️🏖️🏖️
  • DiAngel
    06-21
    DiAngel
    I don’t use 4% rule to set my investment goal. Instead this year I set a KPI of SG dividends of $24K. I did a rough estimate and I need another 3 counters to achieve my KPI. As some counters were either purchased last month or this month, hence I have missed 1st half dividends. Anyway, I m planning for next year [Happy][Smile][LOL][Chuckle][love you]
  • nomadic_m
    06-23
    nomadic_m
    *Do I use the 4% rule to set investment goal?*

    Let's say I want to retire in 20 years time, so...

    To save $3,000,000 in 20 years, i would need to save:

    - $150,000 per year (simple calculation)
    - $75,000 - $90,000 per year (assuming 7% annual return and 2% inflation)
    - $6,250 - $7,500 per month (assuming 7% annual return and 2% inflation)

    To achieve $150,000 a year in I may need:

    - A portfolio size of $2.5 million to $5 million, depending on the dividend yield or interest rates.
    - An average annual return of 6% to 8% on your investments.
    - A combination of stocks, bonds, and other assets to generate passive income.

    Where to find a portfolio size of $2.5 mil to $5 mil?!

  • Tiger V
    06-22
    Tiger V
    I believe the 4% rule offers a straightforward and effective framework for setting investment goals. However, it's essential to remember that personal circumstances and market conditions can vary. Hence, it’s crucial to revisit and adjust the plan regularly to ensure it remains aligned with your financial objectives and life changes.

    How’s My Investment Goal Going?
    Personally, my investment journey is ongoing, with a keen focus on building a diversified portfolio that can generate steady returns. I regularly reassessing my goals against the backdrop of the 4% rule.

    The “4% rule” is merely a guideline that setting a goal to accumulate assets that are at least 25 times your estimated annual living expenses. However, wealth freedom starts with a plan, and the golden rule applies are: 'the earlier you start, the better!'

    By starting early and staying disciplined, I’m confident that I’m on the right path to financial independence and early retirement.

    @CSing how do you think?

    • icycrystalReplyTiger V: 
      [Like] [Like] [Like]
    • Tiger VReplyicycrystal: 
      It's always never too late and opportunities are always there so long you are still alive. Staying disciplined and working towards your goal step-by-step [Victory]
    • icycrystal: 
      well said... I felt that I have started late [Sad] [Sad] [Sad] missed so much already [Facepalm] [Facepalm] [Facepalm]
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