I’ve been thinking a bit more about #adulting sorta things lately – including retirement. For the past few years, I’ve casually set aside funds and played around with various investments but recently I began to look into it with a bit more focus and goal-setting.
So how much does one need to retire?
Here’s a method
to calculate your financial independence (FI) number
– the amount of money you need so that you can live off its investment returns without depleting it.
- Decide how much you want to spend yearly. The simplest way to do this is to take your monthly expenses and multiply by 12.
- Decide on your safe withdrawal rate – the percentage of your funds you can withdraw each year without it running out before you die.
- Use the formula: FI number = Yearly spending / Safe withdrawal rate
Say I want to spend MYR 240,000 per year and since I like having a bit of a safety net, I’ll use a 3% withdrawal rate, my FI number would be:
MYR 240,000 / 3% = MYR 8,000,000
It’s easier to track progress when there’s a goal 💰
Question: What are your biggest worries about retirement as a freelancer in Malaysia?