Comments on: Step 6: Achieve Financial Independence One couple's story of escaping 9 to 5 until 65 Wed, 20 Jul 2016 17:22:09 +0000 hourly 1 By: Bryan Wed, 16 Sep 2015 17:55:24 +0000 Thanks for the feedback and the questions DP. I love that our readers keep us honest here!

My example to Erik was meant to show that when you apply the more conservative 3% Rule you would need to have saved more than if you are drawing funds at a 4% rate.

In our example of expenses, we felt we need $51,072 a year to pay for our lifestyle. Of this $51,072, we expected that we would earn $5,000 per year doing some part time employment. So I was working from that constant annual expanse amount of $46,072 to arrive at $1,534,198 for 3% ($46,072 x 33.33) with some rounding or $1,151,800 for a 4% withdrawal rate ($46,072 x 25).

The good news is that with either approach, we could afford to leave our employers right now!

By: Bryan Wed, 16 Sep 2015 17:38:14 +0000 Thanks for sharing your thoughts with us. We too struggle with trying to understand our FI number and where to place our focus. You are not alone my friend!

We went through the “mental jumping jacks” ourselves when we paid of our home mortgage that we shared in this article. Should we pay off most of the rental real estate debt that has a similar interest rate as the home mortgage and then would free up more cash flow, or do we pay off the personal home mortgage that has too little amount of interest to itemize on our taxes?

Now six months has passed since paying off our home and we hardly think about it anymore!

By: DP @ Someday Extraordinary Wed, 16 Sep 2015 13:34:28 +0000 I had the same question as Erik above. I understand by your explanation how you reached the higher 3% number than the 4% number, but I think it is a little misleading. Shouldn’t your fixed amount be the amount you can save? So, for example, you need $1,000,000. At 4%, you will live off of $40,000 per year. However, you think you can live off of 3% = $33,000 per year. $33,000 per year x 25 years is only $825,000 total that you need.

Again, I understand that you were keeping constant the $40k that you need to live off of per year, but this is just how I read it.

Anyway, another good write up! I like the detail you provide in your posts.


By: Jason Tue, 15 Sep 2015 23:31:49 +0000 I enjoyed the post. My problem is still doing mental jumping jacks trying to figure out my FI number. I know we focus on the spending side of thing, but FI to me has to be without the mortgage and the rest of this debt gone. Then I can adjust my spending as of right now, but it is still a bit in precise, particularly when I consider what prices will be in a few years. Maybe I need to go back and look at these calculators. But then I do mental jumping jacks is if I should pay off the house before I save so that I can get a quicker to the FI money. Or maybe I just need to focus….

By: Erik Fri, 11 Sep 2015 17:36:32 +0000 Ah! Ok, I see what I was thinking about. I wasn’t keeping the desired level of income constant. I had it backwards, I was looking at it like, if we had the same $1,000,000 investment nest egg, then to withdraw 3%, it would be taking out less capital. Just a mix-up on my part.

Thanks for clarifying!

By: Bryan Fri, 11 Sep 2015 17:12:03 +0000 Luke – I told you I was going to steal your term “YOLO Bender! 🙂 Check our “glossary” if you have not already done so.

Thanks for the kudos and I am glad this article was helpful.

By: Bryan Fri, 11 Sep 2015 17:09:45 +0000 Erik,

Thanks for the feedback on the series and the concern about the math. You got me thinking about it and I believe the math is correct.

Let’s use a different example that it takes $40,000 per year in income to support your lifestyle. Here is the math: $1,000,000 x 4% = $40,000. If you used 3% the math would be: $1,333,200 x 3% = $40,000 (rounded). You can see that using the more conservative 3% withdrawal rate means you need to have saved $333,200 more ($1,333,200 – $1,000,000).

The other approach is to take the 4% rule by multiplying 25 x $40,000 to arrive at a $1,000,000 nest egg needed to retire. The 3% rule is 33.33 x $40,000 to equal $1,333,200.

Please do let me know if my calculations are wrong.
Take care!

By: Luke Fitzgerald @ FinanciallyFitz Fri, 11 Sep 2015 14:02:45 +0000 YOLO Bender!!! 🙂

Great coverage on a complicated topic! I learned a lot!

By: Erik Fri, 11 Sep 2015 04:07:35 +0000 Hey Bryan, great post. I really like this series.

Only question I have is, why for the 4% withdrawal scenario is the required amount put away less than the 3%? Shouldn’t this be the other way around? For 4% withdrawal, we should need more…

Thanks, Erik