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Personal Finance Rules of Thumb

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 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.