The 4% Rule for Retirement

The 4% rule is a rule of thumb used to determine the amount of money to withdraw from a retirement funds each year for your expenses. This rule seeks to provide a steady stream of funds to the retiree, while also keeping an account balance that allows funds to be withdrawn for a number of years.

With the continuing depreciation of Ringgit and inflation on daily necessities, I think you will need RM 1 million to live a reasonable comfortable life after retirement. And I'm talking about simple middle class life and not more than that. For some other people, they may think it should be RM20 million.

Also, another big difference is that I don't have kids to support. Most people my age will still have kids in the university so your consideration may be quite different from mine.

I try to follow a fairly thrifty lifestyle and yet sometimes I am shocked looking at my receipt after the cashier at supermarket handed it to me. Half a trolley full will be like RM200-250. I think to be fairly comfortable for me, I am looking at about RM6,000 per month. That means you have to generate at least 5%-6% on your investable assets to maintain your yearly expenditure and still have some funds for emergencies without dangerously depleting your nest egg.

The golden rule is YOU EITHER SPEND LESS OR EARN MORE.

Most people who get into financial trouble either ignore it or think they can get away with it. They will say "never mind la". Well you can't. "Never mind" will fuck up you life.

I personally think you have to actively manage your retirement funds. I'm not talking about actively trading or switching the asset class. I'm talking about actively reviewing and fine-tuning how much you have, how much you spend, and what kind of returns you are getting. If you can, just spend the dividend and trading profit without touching on your capital.

The reason you can't neglect this aspect of your retired life is that if you somehow screw up or depleting your savings too fast, you might have to go out to get a job. You don't want to have to try and find a job at the age of 65. It's not funny, I swear.

I have some investment background but I am no investment guru. In my blog I will try to share some information and thoughts so that you can start taking a look at this a little deeper yourself. Feel free to leave any comments at the bottom.

Anyway, I found this calculator click here that I think it's quite fun to play around with.

You can plug in the figures in the fields provided and see the results. I would suggest you do a check-up at least once every 6 months. For me, I do it once a month.

This is useful not just for retired person but for people planning for retirement. No matter how young you are, it is never too early to start gaining some financial literacy particularly in the area of retirement planning.

You have no idea how liberating it is to have the "fuck you" money and never have to work for another day in your life.

The day you can achieve financial independence can be different for everyone. For some people, they have found passion in their work and will work till the day they die, and that is also a good thing. Limpeh clap for you.

But for others, it is completely miserable when you are 50 or 55 or 60 and you still need to take shit some stupid boss.

A good place to start is here. You may not agree with me, but if you are starting to think about it, then it is a positive development. I have no human children so this is particularly important for me. Even if you have children, you don't want to be going to them and expect them to take care of you financially. They have their own financial burdens and shit to deal with.