What is financial independence to you? Is making more from investments than you spend financial independence? Is it when 4% of your portfolio equals what you would spend in a year? Is it making more than your total comp in investments? Do you need to own a home free and clear in the Bay Area AND have enough in the portfolio that no FANG company can pay you as much as 4% interest would?
How do you factor inflation in the 4% tule?
It is already built in. Lots of literature on it from financial researchers (actual researchers, not advisers who have no vested interest in your fin well-being.) Just google and you should be able to find a bunch of really detailed research and articles on this.
You can make more than 4% so spending 4% already offsets inflation
FI for me is having the 4% to cover all expenses incl taxes and travel. For some folks who spend a lot that may mean a nest egg of $10M+ ... for me that number is much lower... My advice for you is think carefully about the lifestyle you want to have in FI, how much money do you need to spend per year (then add a buffer anyway), if you plan to do a little bit of work after FI and if you have a partner and what their expected contribution would be. Obv whether you want children is also a consideration. People go through IVF during FIRE, so it is doable but always a good idea to consider. The key for me is I don’t plan to retire early in the Bay - if that’s your plan - get ready to accumulate a SUPER large nest egg. Since I plan to live abroad and settle in another, much cheaper place I’d consider myself at FI when I get to $2M. $4M is ideal, but since I have a partner $2M should cover everything on my side + travel. What’s your #, OP?
I spend 25k a year.... 4% seems risky.
2.5M is my personal ideal for living in they bay and abroad would be much much lower (depending on location). That doesn’t account for lifestyle inflation (the only thing I know will inflate everyone’s lifestyle if they choose it is kids, even if just to eventually have another place for someone to sleep).
4% rule, but liquid and not incl college savings
Yeah this is what I think too, owning a home free and clear helps with the 4% rule because in theory it keeps costs down (depending on home/area).
Yep, I would say mortgage ~500k is nothing to worry about though. And reduces taxable income.
“Do you need to own a home free and clear in the Bay Area AND ... FANG company...” Epistemic closure, irl ... 🤦
4% rule
On what you spend? On your bare minimum budget (I.e: no travel)? As your base pay or TC?
You have to all expenses including medical insurance and payments. For me that number is around 150k per year. Hence, my target is 3.8M in after tax portfolio. To calculate, I remove 30% from 401k balance as it's pretax money.