How much do I need to retire early?


The Study – the 4% Safe Withdrawal Rule

The idea is simple: Given a bucket of assets, how much can you withdraw each year and not run out of money? For the details, read the paper.

“For stock-dominated portfolios, withdrawal rates of 3% and 4% represent exceedingly conservative behavior. At these rates, retirees who wish to bequeath large estates to their heirs will likely be successful. Ironically, even those retirees who adopt higher withdrawal rates and who have little or no desire to leave large estates may end up doing so if they act reasonably prudent in protecting themselves from prematurely exhausting their portfolio.”

The simple answer is 4% a year from a portfolio of 75% stocks and 25% bonds.

How did they come to this? The authors ran simulations on historical data from 1926 – 1995, looking at 30 year periods and following the results of pulling out 3% to 12% of funds annually.

Be flexible to increase your success

One of the often cited limitations to the trinity study is that the formula was applied in a rigid manner. If you slightly reduce your spending in down market years your odds of success are much higher.

A 4% Safe Withdrawal Rate (SWR) also doesn’t take into account any sort of side income. Again, being flexible could be key. Maybe after a down market year you hustle a bit, which means you don’t need to take as much from your savings. Small adjustments like this can make a major difference in the long term.


Method 1
Take your monthly expense x 12 = yearly expense. if you need around $3,333/mo x 12 = $40,000

Need $40K a year to live on? $40,000 / 0.04 = $1,000,000

Reduced your expenses to $30k? $30,000 / 0.04 = $750,000

If you are really frugal? Can you live on $20K a year? $20,000 / 0.04 = $500,000

The nuns and monks at Plum Village could live on $6000 a year. $6000 / 0.04 = $150,000.

I considered doing the 5-years program at plum village for awhile. Life was very nice and peaceful, no worries. It was cool to be there.

Method 2 – 300 rule
Retirement number = monthly expense x 300
Retirement number = $3333 x 300 = $999,900 (1 millions)
So on and so forth.

Again, this is assuming **no other income** for the rest of your life.


  1. That’s a lot to think about and it seems so intimidating. I have a rough time evaluating how much I can live on when I retire.

    • Recently, I’ve discovered a new term “pre-retirement” where you’d actually retire from your career, and only focus on the things/hobbies that you’d actually rather be doing. If that hobby let you make a little bit of money, great! If not, you’d still have your expenses cover.

      That’s what I’d be focusing on in the year 2017. Quit my job, and focus on research or writing or language. The possibilities are limitless.

      As far as estimating how much you’d need, a money tracking of income and expense for 6 months to 1 year, will give you an idea how much you’d need during the healthy pre-retirement years. After 59 years old, the Roth IRA will kick in, after 65 years old, social security and 401k or traditional IRA will kick in.

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