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How to Calculate Your Financial Independence Number for Retirement

How to Calculate Your Financial Independence Number for Retirement
By zhēnyuè • Issue #2 • View online

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. 
  1. Decide how much you want to spend yearly. The simplest way to do this is to take your monthly expenses and multiply by 12. 
  2. Decide on your safe withdrawal rate – the percentage of your funds you can withdraw each year without it running out before you die. 
  3. 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? 
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zhēnyuè

Bite-sized how-tos on freelancing, finance, and following white rabbits.

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