[ADVSIOSR VIEW] Financial planners use the rule of 72. This rule is explained in the link below by: Maria Smit - BrenthurstSA. Moneyweb InvestingTips
As financial planners, we often get asked what the secret is to retiring wealthy. There are a few rules you can live by to give you a head start. But investing is like a marathon – you need to put in the work over the long term. There is no quick sprint in the last few years of retirement.While it’s important to be cautious when investing, avoiding all risk when investing over the long term can actually be counterproductive. Financial planners use the rule of 72.
The rule suggests that if you withdraw 4% of your portfolio value in the first year of retirement, and adjust that amount annually for inflation, your portfolio should last for at least 30 years. For example, if you have a R1 million portfolio, the 4% rule suggests that you can withdraw R40 000 in the first year of retirement, and then adjust that amount for inflation each year.
It’s important to note that the 4% rule is a guideline and not a guarantee. Your actual retirement needs may vary based on your lifestyle, expenses, and investment portfolio performance. Additionally, market volatility can impact the success of the 4% rule. In a down market, the amount you withdraw from your portfolio may need to be adjusted to avoid depleting your savings too quickly.
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