Investing Rules of Thumb
The Multiply By 25 Rule
The Multiply By 25 Rule tells an investor how much he needs to save to generate an income stream of a specified size. Say that you need an inflation-adjusted $50,000 to live on in retirement. The Multiply By 25 Rule tells you that you need to save $1.25 million to meet your goal ($50,000 times 25 equals $1.25 million). See
- The Multiply By 25 Rule and the 4 Percent Rule
- Using Multiply-By-25 Rule to Retire One Expense at a Time
The 4 Percent Rule
The 4 Percent Rule tries to address the question of how much a retiree can withdraw from his or her retirement account without risking it running out before a 30 years period. The study that resulted in this rule assumes a 7% average annualized return and accounted for stock market volatility to come up with the 4% figure as a safe amount. See The Multiply By 25 Rule and the 4 Percent Rule.