Retirement Planning6 min read
The 4% Rule: Is It Still Relevant for FI?
FT
FinaviHub TeamWhat is the 4% Rule?
The 4% rule is a guideline suggesting that retirees can withdraw 4% of their portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, with a high likelihood the money will last 30 years.
Why It Matters for FI
For the Financial Independence community, the 4% rule became a quick way to estimate a "FI number": simply multiply annual expenses by 25.
Limitations
- It was built on historical US market data, which may not repeat.
- It assumes a fixed 30-year horizon, but many FI seekers retire much earlier.
- It does not account for flexible spending, part-time work, or changing goals.
A More Sustainable Approach
Rather than relying on a single fixed percentage, sustainable FI planning looks at whether your accessible funds can support your expenses and goals indefinitely, accounting for taxes, withdrawal order, and real growth-rate variability.