Calculate your path to FIRE and plan your retirement.
How do you know when you have enough money to stop working forever? The most famous mathematical benchmark in the Financial Independence, Retire Early (FIRE) movement is the 4% Rule.
In 1998, three professors at Trinity University published a study looking at historical stock and bond returns. They wanted to find a "Safe Withdrawal Rate"—the maximum percentage of a portfolio you could withdraw in Year 1 (and adjust for inflation every subsequent year) without running out of money over a 30-year retirement.
They found that a portfolio invested heavily in equities had a near 100% success rate if the retiree withdrew exactly 4% in the first year.
Because of the 4% rule, finding your required retirement corpus is incredibly simple. You just multiply your annual expenses by 25.
₹12,00,000 * 25 = ₹3,00,00,000 (3 Crores)Why 25? Because 100 / 4 = 25. If you have 25 times your annual expenses invested, you can safely withdraw 4% of that total amount every single year.
The original 4% rule assumes a 30-year retirement and historical US market data. For a much longer early retirement (e.g., a 50-year retirement starting at age 35), many modern financial advisors recommend a more conservative 3% to 3.5% withdrawal rate.
A 3% safe withdrawal rate means multiplying your annual expenses by 33.3 instead of 25 to find your target corpus.
According to the Trinity Study (4% Rule), how do you calculate your target retirement corpus?