Retirement Planning Everyone worries about retirement. This is a phase when one wants to enjoy life without financial worries, pursue hobbies, travel and spend quality time with loved ones. However, careful financial planning is essential for a comfortable retirement. We are sharing with you the 30X investment rule for the best retirement planning. This rule states that you can consider retiring when your savings are at least 30 times your annual expenses. Let’s find out how this rule works and how it can be applied.
Understanding the 30X Investment Rule
This is a simple but great rule for retirement planning. The essence of this rule is to accumulate a sum 30 times more than your annual expenses before you retire. This amount is considered sufficient to maintain your lifestyle without the fear of running out of your savings. For example, if your annual expenditure is Rs 10 lakh, the 30X rule suggests that you should aim to save Rs 3 crore before considering retirement.
4% withdrawal rule
A key component of the 30X rule is the 4 per cent annual withdrawal rate. This rate is derived from the principle that an annual withdrawal of 4 per cent of your retirement fund is easily sustainable over a long period of time, typically 25-30 years. This rule assumes that your investments will continue to grow, compensating for withdrawals and inflation, thus maintaining your fund. For example, with a retirement fund of Rs 3 crore, you can safely withdraw Rs 12 lakh per year (which is 4 per cent of Rs 3 crore). This amount will cover your essential expenses.
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