The 4% Rule | How To Achieve Financial Independence

► The 4% rule is a tried-and-tested formula for achieving financial independence. In this video, I explain the 4% rule and how you can use it to achieve your own financial goals.

Timecodes:

0:00 - Intro
0:20 - The 4% Rule - The Origin
2:25 - Takeaway #1 (Guideline, Not A Hard Rule)
3:51 - Takeaway #2 (High Income Is Not A Prerequisite)
5:53 - Takeaway #3 (Avoid High Fees)
8:22 - Takeaway #4 (Risk, aka Stocks Are Crucial)
9:58 - Takeaway #5 (To Retire Early, Spend Less)

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DISCLAIMER: I am not a financial adviser. These videos are for educational and entertainment purposes only. I am merely sharing my personal opinion. Please seek professional help when needed.

[MIchaelGuzman]

It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.

[katherinedunnington]

The thing that never seems to be explained on the 4% rule is that it’s the rule to preserve the initial capital NOT the rule for how long your money can last. If you’re ok with not leaving a legacy and spending down the principal, then you could withdraw a greater amount. Tae, thank you for at least mentioning that assumption.

[donaldlocher]

Inflation has a greater impact on people's cost of living than a crashing stock or housing market,
resulting in an immediate and tangible effect. This explains the current high level of negative market sentiment and our need for assistance in surviving this challenging economy. The financial markets have underperformed due to fears of inflation, causing stock and bond prices to plummet. Despite sounding basic, consulting a financial advisor has enabled me to outperform the market and achieve a profit of $850, 000 since June 2022, making it the ideal approach to enter the financial markets today.

[dorissteve]

Retirement is wonderful if you have two essentials — much to live on and much to live for. Invest wisely and get good returns.

[fromthecatskillstotheworld]

One of the best wide-view analysis and explanation of the 4% rule. It is a great guide and starting point, but not a blind rule to follow. The idea that inflation can be blindly increased for is short-sighted and foolish. In addition, in bad years taking out a little less will really extend one’s portfolio. Belt-tightening and a little splurging is a natural and normal part of our financial lives.

[kennydowning]

Thank you, I've been looking for the break down of the portfolio in the 4% study for a while and you just answered the question for me at a high level.

[jimstoops]

To me the important point is the expenses after retirement. What is one of the biggest - housing. So focus on reducing that number goes a long way to reducing the retirement expenses. I'm putting extra into my mortgage principle and will have the mortgage paid off by retirement day. Not easy for everyone to do but it should be part of the discussion and strategy for success.

[BigNoseDog]

The most valuable part of this video is where you discuss lifestyle spending. In my 20s and 30s, I equated being frugal with eating one’s vegetables. In other words, it isn’t fun. I eventually read about the 50-30-20 budgeting rule. Like healthy eating, it requires discipline to stick to a budget. But just like eating healthy, it’s worth it in the long run.

[geoengr]

To be clear the Trinity Study defined "success" as a portfolio not running out of money. A successful allocation/withdrawal combination would not necessarily preserve the original principal account balance.

[mattgrable]

Invaluable, quality advice on this channel. I've often thought about making a channel like this myself but have convinced myself the time investment is too much right now. Tae is providing such rare and desperately needed information to many. Hats off to you, and I expect to see you channel's growth grow steadily and incrementally to afford you more than the lifestyle you dream of. Tortoise style! Maybe even turbo tortoise style : )

[bvoyelr]

I've always wondered -- has the "financial community" such as it is ever revisited the question of asset allocation in light of the idea of index funds? The typical advice is to start out mostly allocated in stocks and shift to safer vehicles as you approach retirement. But index funds don't seem to carry the same risk profile as stocks even though that's basically all they are.

They can still crash, mind you, but they don't even exhibit the same behavior when they do crash -- they crash less and bounce back quickly, so even if your fund does suffer, it's never for long (I suppose it's possible for an index fund to go belly up, but I can't imagine a scenario where that would happen without other cataclysms rendering it comparatively unimportant). Unless you're living on a razor's edge financially, you can theoretically wait out the crash by reducing your income for a while.

In light of this, I wonder if it's really important to diversify into lower risk savings vehicles anymore. I'm at least curious what more engaged individuals think about it.

[Patriciacraig]

What is the best way to profit from the current market, meanwhile I'm still undecided about investing $400k in my stock portfolio to get some dvidends and minimize risk

[mccoyji]

8% return compounded is the real hokus
I like the idea of smaller lifestyle.

[joshuarizalforeman]

Interesting. I invested about 500k USD in residential and commercial property in the Philippines. That has since doubled in value, and also affords me an income through rental. I also invested 100k USD in European and Asian stocks which, over the past 4 years has yielded me about 12% p.a. I was only expecting 6% max, so that's a plus, although I don't expect it to remain at that level on a long-term basis. However, have no debt and my initial investment is protected. I retired at 50 and my family and the next 2 generations will have no financial worries.

[neildesposito]

Great video, very interesting, please don't stop with your informative videos, thank you.

[--juan]

Hey Tae, let me know if I am totally mixing up concepts here, now that 30-year treasury-bonds are starting to break into the 5% range (hey maybe it goes to 6%) can I now start thinking since I'll be getting over 4% then I'll just park my money in these t-bonds? Why would that not be a good idea? What factors are being missed in that thought process? (inflation, stock value gain/loss, etc?)

[henryr]

Thank you! Please can you do a video on the decision to invest in stocks or buy a house? I'm unsure whether to keep building my stock portfolio or use it as a deposit on a house. I think there are many in my position.

[LivinginthegoGreen]

I'm a new subscriber and kindred spirit. I love your channel. Great information.

[dlsodadl]

Or you can own a real estate portfolio and enjoy rent to price ratio of 4%... or more all the while enjoying the steady growth of your portfolio with less volitility

[TheMarcinM]

I try to follow my personal rule 90% save and 10% spend