FIRE plan backFIRED!!
- Thread starter womble7
- Start date
haileylynn
New member
@womble7 Dude why are you trying to reinvent the wheel. The 4% rule includes inflation adjustments and investment returns(balanced portfolio).
Seems like you do not trust the financial markets if that is the case maybe you should do research about becoming landlord.
Rental yields can be around 3-4% if you invest in small flats. Also most of the time they perfectly track inflation.
You can keep buying them one at a time and renting them out until you reach your magic income one day and then you can retire.
Most of your net worth will be in real estate so be careful about location. Do not put all in one city because if something like a serious water crisis happens those investments will be worth 50% of their value due lack of renters.
Seems like you do not trust the financial markets if that is the case maybe you should do research about becoming landlord.
Rental yields can be around 3-4% if you invest in small flats. Also most of the time they perfectly track inflation.
You can keep buying them one at a time and renting them out until you reach your magic income one day and then you can retire.
Most of your net worth will be in real estate so be careful about location. Do not put all in one city because if something like a serious water crisis happens those investments will be worth 50% of their value due lack of renters.
@haileylynn I do trust the markets and have 60 percent equity allocation as of today
Tbh i donot know the 4 percent rule will surely explore and as someone else also pointed out read the wiki..
Tbh i donot know the 4 percent rule will surely explore and as someone else also pointed out read the wiki..
haileylynn
New member
@womble7 In simple terms let's say your expenses are 4 and so you need capital of 100.
Statistically speaking average returns are 3-4% more than inflation and that is what you are consuming.
I year one let's say your returns were 12% while inflation was 8%, you consume 4% while reinvesting the excess 8% to counter inflation.
The big thing with this rule is if you capital falls due to bad market conditions your 4% will be less than 36 lacs and you will have to manage your expenses with that. On the flip side if market is good that 4% will be more than 36 lacs.
Statistically speaking average returns are 3-4% more than inflation and that is what you are consuming.
I year one let's say your returns were 12% while inflation was 8%, you consume 4% while reinvesting the excess 8% to counter inflation.
The big thing with this rule is if you capital falls due to bad market conditions your 4% will be less than 36 lacs and you will have to manage your expenses with that. On the flip side if market is good that 4% will be more than 36 lacs.
resjudicata
New member
@ssbc 75K/month with 10% step up at 12% return, in 30 years will be approx 66 crores.
But keep in mind that 10% step up is very ambitious goal. You are assuming that your savings (or say Salary) will grow 10% every year for next 30 years, but marriage, kids, unexpected expenses, inflation, etc can put a dent on it.
A 5% step up would be more realistic, which will give you 39.5 crores.
But keep in mind that 10% step up is very ambitious goal. You are assuming that your savings (or say Salary) will grow 10% every year for next 30 years, but marriage, kids, unexpected expenses, inflation, etc can put a dent on it.
A 5% step up would be more realistic, which will give you 39.5 crores.
@resjudicata That's a really good figure as well. I am aiming for 25-30 crores for retirement in the next 30 years. I am 25 currently and want to retire around 50-52 maybe. Considering inflation cost and everything is 25-30cr enough to retire after 30 years ?
resjudicata
New member
@ssbc Your yearly expense now = X
Inflation avg over 30 years = 4%
Your annual expense after 30 years = 3.24X (might increase because of added responsibilties)
Now use this SWP calculator http://easy-calc.com/financial-calculators/SIP/Advance-SWP-Calculator
where SWP amount is 3.24X/12 and initial investment amount is 25 crore. Return 10% and inflation 4%. Period= how long you want to live after 30 years from now.
Inflation avg over 30 years = 4%
Your annual expense after 30 years = 3.24X (might increase because of added responsibilties)
Now use this SWP calculator http://easy-calc.com/financial-calculators/SIP/Advance-SWP-Calculator
where SWP amount is 3.24X/12 and initial investment amount is 25 crore. Return 10% and inflation 4%. Period= how long you want to live after 30 years from now.
@resjudicata Thank you soo much for such a detailed explanation and taking time to reply. Means a lot.
@mrmajesty
Hell yeah! Jk! Well i surely want to have started focussing on my health for the same... Well stress i need to manage still
The whole point of above exercise was to reach a rough estimate and optimise my way up to a more realistic figure.
Hell yeah! Jk! Well i surely want to have started focussing on my health for the same... Well stress i need to manage still
The whole point of above exercise was to reach a rough estimate and optimise my way up to a more realistic figure.