The 4% rule is very conservative - it’s not realistic for somebody like you who understands compounding and investing. It’s based on your portfolio making very low returns once you start drawing from it — around 4% per annum I think. That’s Cash ISA rates! I expect you will be making far higher returns than that by then. Even a low-cost S&P 500 returns about 10%, and I’m sure you can do far better than that. The 4% rule is out of the same stable as the 60% Bonds 40% stocks rule. It’s archaic, a bit like the old ‘get a degree, get a good job, get a mortgage and work hard for 45 years until you retire when you’re too old to enjoy it’ advice of our parents generation. It’s not for you!
I was under the impression it was due to the fact the market was returning 8% on average so year on year it would still be compounding. The 4% is not the growth, it's the withdrawal.
I still stand by my remarks - no offence! As long as you withdraw less than you make, it will of course continue to grow. And compounding will enhance that gap.
My own target annual growth rate is 20% (which thankfully I am consistently beating), so withdrawing at 4% would result in considerable excess, especially over the 30 years that the 4% rule was based on.
If I’m never ever going to spend it, what’s the point in having it!
As I said, the rule is very conservative, it doesn’t fit everybody - it depends how much money you want to have in the bank when you die!
Mia, I'm the same age and making many of the same realizations. I'm a bit further behind in terms of creating the funds and momentum you have so far, but I've laid a lot of groundwork over the past year and I'm ecstatic to grow something that's completely my own!
Great article👌 - I really enjoyed reading it and wished there was something similar when I started my investing journey over 30 years ago. I’m at the other end of the age range having reached the stage where my investments allowed me to stop working in my 50’s. Reaching your figure £1m is doable and your drawdown 4% can work. Although with ISA’s and other tax free investments you can decide how best to optimise your income. Personally, I would also factor in home ownership, which kept me working longer than I would have liked. Now being mortgage free gives me much more security. Of course, everyone’s plan is different and each to their own.
The 4% rule is very conservative - it’s not realistic for somebody like you who understands compounding and investing. It’s based on your portfolio making very low returns once you start drawing from it — around 4% per annum I think. That’s Cash ISA rates! I expect you will be making far higher returns than that by then. Even a low-cost S&P 500 returns about 10%, and I’m sure you can do far better than that. The 4% rule is out of the same stable as the 60% Bonds 40% stocks rule. It’s archaic, a bit like the old ‘get a degree, get a good job, get a mortgage and work hard for 45 years until you retire when you’re too old to enjoy it’ advice of our parents generation. It’s not for you!
I was under the impression it was due to the fact the market was returning 8% on average so year on year it would still be compounding. The 4% is not the growth, it's the withdrawal.
I still stand by my remarks - no offence! As long as you withdraw less than you make, it will of course continue to grow. And compounding will enhance that gap.
My own target annual growth rate is 20% (which thankfully I am consistently beating), so withdrawing at 4% would result in considerable excess, especially over the 30 years that the 4% rule was based on.
If I’m never ever going to spend it, what’s the point in having it!
As I said, the rule is very conservative, it doesn’t fit everybody - it depends how much money you want to have in the bank when you die!
Mia, I'm the same age and making many of the same realizations. I'm a bit further behind in terms of creating the funds and momentum you have so far, but I've laid a lot of groundwork over the past year and I'm ecstatic to grow something that's completely my own!
Thank you!!!
Thanks for sharing, Mia! Your content always reminds me that it's okay to believe you can achieve big things.
Great article👌 - I really enjoyed reading it and wished there was something similar when I started my investing journey over 30 years ago. I’m at the other end of the age range having reached the stage where my investments allowed me to stop working in my 50’s. Reaching your figure £1m is doable and your drawdown 4% can work. Although with ISA’s and other tax free investments you can decide how best to optimise your income. Personally, I would also factor in home ownership, which kept me working longer than I would have liked. Now being mortgage free gives me much more security. Of course, everyone’s plan is different and each to their own.
I love how you wrote this! Very relatable
Thank you!
can't wait to see what you create!