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

Tiger_comments
2024-06-20

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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  • icycrystal
    ·2024-06-20
    TOP

    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!

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    • icycrystalReplying to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
      2024-06-22
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    • 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
      2024-06-22
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    • SPACE ROCKETReplying toicycrystal: 
      Same hais. Have to earn money the hard way 😞
      2024-06-21
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  • setia100
    ·2024-06-21
    TOP
    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%❓🤓
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    • setia100Replying toTiger_comments: 
      You are welcome 🤗
      2024-06-23
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    • Tiger_comments: 
      Thank you so much for pointing out!!! I've revised this in the article.💗💗
      2024-06-23
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    • 谋定后动: 
      谢谢指正，应该是低于4%，而不是高于6%
      2024-06-22
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  • Aqa
    ·2024-06-20
    TOP
    🔥🔥 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’. 🏖️🏖️🏖️🏖️
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  • DiAngel
    ·2024-06-21
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    我不使用4%规则来设定我的投资目标。相反，今年我将SG股息的KPI设定为24,000美元。我做了一个粗略的估计，我需要另外3个计数器来实现我的KPI。由于一些柜台是上个月或本月购买的，因此我错过了上半年的股息。无论如何，我正在计划明年[快乐][微笑][哈哈][咯咯笑][爱你]
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    • 谋定后动: 
      愿闻其详啊[微笑]
      2024-06-22
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  • nomadic_m
    ·2024-06-23
    TOP
    *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?!

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  • Tiger V
    ·2024-06-22
    TOP
    我相信4%規則爲設定投資目標提供了一個簡單有效的框架。然而，重要的是要記住，個人情況和市場條件可能會有所不同。因此，定期重新審視和調整計劃以確保其與您的財務目標和生活變化保持一致至關重要。

    我的投資目標進展如何？
    就我個人而言，我的投資之旅仍在繼續，專注於建立能夠產生穩定回報的多元化投資組合。我定期在4%規則的背景下重新評估我的目標。

    “4%規則”僅僅是一個指導方針，設定一個目標，積累至少是你估計年度生活費用25倍的資產。然而，財富自由始於一個計劃，適用的黃金法則是：“越早開始越好！”

    通過儘早開始並保持自律，我相信我正走在財務獨立和提前退休的正確道路上。

    @CSing 你怎麼看？

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    • icycrystalReplying toTiger V: 
      [贊][贊][贊]
      2024-06-22
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    • Tiger VReplying toicycrystal: 
      永遠不會太晚，只要你還活着，機會總是在那裏。保持紀律，一步步朝着目標努力[勝利]
      2024-06-22
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    • icycrystal: 
      說得好...我覺得我開始晚了[悲傷][悲傷][悲傷]已經錯過了這麼多[捂臉][捂臉][捂臉]
      2024-06-22
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  • MHh
    ·2024-06-20
    TOP
    The 4% is the commonly cited percentage of one wants to live off without significant capital depreciation and accounting for inflation. But I do not go by this. I try to amass as much as possible and I am prepared to scale down my lifestyle if necessary. The other option is also to get stocks that pay good dividends or getting a property to get rental income. Getting a property is of course a high entry barrier so that will take more time. The latter two options mean that I don’t have to try to get so much capital to account for this 4-6%.
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  • Mrzorro
    ·2024-06-21
    I don't think 4% is suitable for everyone. It depends on what kind of lifestyle you want. 6% for Singaporean, yes...haha.. inflation and medical fee is the main problem!
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  • Success88
    ·2024-06-20
    不是真的。取决于我投资什么公司。我会持有一些好公司并保留DCA，不会关心4%的收益，然后就跑掉。😀·艾尔是那个愚蠢的人吗？ @Tiger_comments @MHh @HelenJanet @koolgal @SR050321 来加入
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  • highhand
    ·2024-06-20
    my investment goal is to earn as much as possible to beat the index. don't think about the 4% rule. so far slightly lower than index but let's learn along the way.
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  • GinningAbyss2
    ·2024-06-21
    i have set my goal to make as much profit and try to make as much money. with 4% rule i dont use. i am new at this treading so learning about it and trying to even out before i can make any profit.
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  • BenjiFuji
    ·2024-06-21
    I am more interested in using my annual expenses instead of 12 x monthly as expenses can vary in different months. Also, i am more keen to develop passive income thar exceeds basic necessities for now. What do you think? [Grin]
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  • RXU
    ·2024-06-21
    for me, the % is just a visual cue. we are visual orientated and its easier to work with a number in mind. The 4% rule is great that because it is simple!  knowing i aim to withdraw 4% of my savings each year, I can plan ahead with flexibility to adjust based on market changes and my personal needs [Miser]
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  • Kengs
    ·2024-06-21
    I think it’s a useful reference but not a magic number. You could continue to work and explore interests, hence getting constant stream of active income. You could also need large expenses.
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  • Eded
    ·2024-06-21
    I am not financial savvy. I keep aside 10 percent instead to invest on s&p etf, gold etf and Bitcoin etf to do the income generation in recurring monthly basis.
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  • hd87
    ·2024-06-21
    I set my investment goals by buying valuable companies. I agree 4% rule to certain extent. I use multiple brokers and platform for my investment. There are ups and down. So far, it seems to be on track
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  • ECLC
    ·2024-06-21
    Whether 4%/6% rule, it is beyond reach to hit the required savings unless downgrade housing. Hence, see no point in setting investment goal; just continue cautious trading to have more gain than loss hopefully.
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  • TheStrategist
    ·2024-06-20
    This is the first time in my life of hearing this 4% rule. First things first most of us are not individuals by the time we all retire. We are either married or still have children that are not fully independent. It's not that easy as you have to factor in a lot of assumptions and situations. If only life was that simple. As you age you might even spend less as you start to slow down as you get older. What you spend today or now is not the same 5 or 10 years down the road when you are 50, 60 or 70 years old. How you wish life was that simple man.
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  • Kubbie
    ·2024-06-20
    4% skews towards the conservative side; a 6% - 8% figure is treading on the safer side for most people. This is, of course, my own personal opinion and not the encompassing biblical truth.
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  • moliya
    ·2024-06-22
    great DiAngel
    just would like to understand more from ur strategy?
    1. are u buy n hold SG dividend   counters? for long or
    2.  hop on counters for dividend?
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