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The 4% rule “needs to be fine-tuned for the FIRE movement.” Most advice focuses on building the largest portfolio possible without considering how much is “enough” for you. This is in stark contrast to standard investing advice. I can’t emphasize this point strongly enough! Having a specific goal can inspire massive, immediate, and life changing action in many people who previously were drifting along. Your spending determines how much you need to be financially independent. It forces you to focus on your personal spending.

This is a great place to start determining how much you need to be financially independent. That blog post uses the 4% rule as the basis of determining when you are financially independent. Money Mustache blog post The Shockingly Simple Math Behind Financial Independence as being life changing. In the Choose FI book, we noted that many people who have achieved or are on the path to financial independence cited the Mr. What Is Absolutely Right With the 4% Rule? Unfortunately, it brushes over THE vital point as it relates to how the FIRE community uses it and why the 4% rule has become so ubiquitous with FIRE. The Vanguard paper focuses on all that is wrong with the 4% rule. The 4% rule is flawed for early retirees (and traditional retirees for that matter).

The opening section focuses on the 4% rule’s origins from a 1994 paper by William Bengen, the assumptions Bengen uses, and why following the rule creates risk for early retirees. The Vanguard paper starts with a summary of the 4% rule. How can these concepts be applied in our real life scenarios as we prepare for early retirement? I’ll share my thoughts on some important points Vanguard raises. It ignores the reality of what people who embrace this philosophy actually think and do. Unfortunately, it quickly became apparent that Vanguard has bought into the myth that this is a community of naive investors and planners. I was curious what they would add to the conversation with the impressive team and massive amounts of data at their disposal. Vanguard has a long history of doing what is best for individual investors. I was excited to see FIRE on the radar of this institution where I hold my investments. Four Dividend Achievers Rewarding Shareholders wit.Investment behemoth Vanguard recently published an article titled Fuel for the FIRE: Updating the 4% Rule for Early Retirees.Should You Applaud Vanguard's Move To Close Its Ac.How much time does it take to manage my dividend p.Seven Dividend Achievers Rewarding Shareholders wi.The Simple Math Behind Early Retirement.My own unique approach to investing for retirement.How Dividend Growth Investors can prosper even if.

The shockingly simple math behind early retirement reddit how to#

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Use these tools within your control to get rich Front Loading Savings for a Successful Dividend Retirement How to retire in 10 years with dividend stocks I started out in my early 20s, and am pretty close to being financially independent by my early 30s. Starting out as early as possible helps tremendously too. However, we can somewhat control our savings rate, and the investments we make. We have no control over stock market returns, or expected dividend growth rates. What this exercise shows you is that you need to focus on things within your control, in order to reach your goals. This post was inspired by this article from the Mr Money Mustache blog. For those who strive to retire early, it is quite possible that they will exclusively rely on the income produced from their investments. In most situations, a person would have pension income and social security income or even some part time job income to rely upon, when they retire. I am also assuming that this investment income is the only income to provide the essentials for a basic retirement income. More complications are probably going to confuse people, rather than make it clear for them. I also am ignoring the effect of taxes on investment income, since everyone’s taxes are different, and I didn’t want to complicate too much this simple truth. I assume a “real salary” that does merely keep up with inflation, and investment returns that are also “real” and therefore are after inflation.

The shockingly simple math behind early retirement reddit download#

You can download it, and play with your own assumptions. You can view the spreadsheet behind the calculations from this link. This chart shows how long it would take for the investment income to exceed the amount of savings, given the return, the dividend growth, dividend reinvestment and savings assumptions.