The ‘4% Rule’ helps you decide how much money you can withdraw from your retirement corpus. In your first year of retirement, you should withdraw only 4% of your total retirement fund.
For example, if you have Rs. 1 crore at retirement, you should take out Rs. 4 lakh for your first year’s expenses (about Rs. 33,333 per month). In the following years, you shouldn’t withdraw 4% again. Instead, you should take the initial amount of Rs. 4 lakh and add that year’s inflation rate to it.
This rule was created with a 30-year retirement period in mind. However, since inflation and medical costs are high in our country, it’s important to review your fund regularly. These 5 basic rules can greatly help ordinary people fix their financial lives. You can build a solid portfolio with the 100 rule, manage your salary with the 50-30-20 rule, and achieve security with a 6-month emergency fund.
Also read: Going on Trip? Don’t Ignore Your Suitcase Wheels—This Tape Hack Could Save You Trouble