Friday, October 15, 2010

The 4% rule

There is a "rule" hanging around out there about how much you will need in retirement. Basically it states that if you take your yearly cost and divide them by .04 the end result will be the amount you need in a nest egg. At the end of 30 years you will deplete the account.

Food at my house is about 4800 a year. Divide that by .04. The answer is 120,000. That is the amount that I need in my nest egg to supply food for 30 years. Inflation is counted in because your nest egg should grow at the rate of inflation (unless we get another oil embargo and inflation flies through the roof like it did under Carter).

The second largest thing we need to save for? Property taxes and insurance. I figure in ten years we will need to move from this land so we can afford property taxes. Arizona has some of the lowest property taxes- who knew!


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