4% RULE FOR FINANCIAL INDEPENDENCE AND RETIRE EARLY (FIRE)

The "4% Rule", an effective method used to take an important step towards financial independence, offers excellent guidance to investors. This rule aims to achieve financial goals by creating a portfolio and considering inflation and return balance.

The 4% Rule focuses on determining how much money we need in total for financial independence and retire early (FIRE). The main goal is to create a portfolio and ensure that this portfolio provides a +4% return above inflation. We withdraw 4% of the return and spend it, while the rest is left in and the principal continues to appreciate, including inflation.

An important point to note when using this rule is that sample calculations are generally made on the returns of 50% bonds and 50% stocks (S&P 500 Index Fund) in the United States. These calculations generally include time intervals of 40 years and the minimum withdrawal amount is determined to reach the figure of 4%.

If we want to formulate this;

The amount you need annually (target)/4*100

Let the amount you need annually be $36,000.

According to this;

36,000/4*100= $900,000

We increase $900,000 by 4%, withdraw $36,000, and leave the remaining amount in our portfolio to hedge against inflation.

For anyone aiming for financial independence, the 4% Rule can be a powerful strategy. However, it is important for each investor to determine an appropriate strategy based on their personal goals, risk tolerance and local economic conditions.

Thank you all.