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How much do I need to retire?
Why Dividend Investing Is the Smarter Way to Build Your Retirement Nest Egg
“How much I need to retire?” This is a question that keeps me up at night. For several decades, we have been told that we need a million dollars so that we can withdraw 4% each year. While this rule has served my parents' generation well, I believe this rule is outdated and, more importantly, there is a smarter way to plan for retirement — one that better aligns with today’s market realities.
Rethinking The 4% Rule
The 4% rule was designed for a different era. It assumes that we retire at 55 and live to 85. Our retirement nest egg needs to only last us 30 years if we withdraw 4% annually. But this model falls short in today’s world because:
- People are living longer — many into their 90s and 100s post-retirement.
- Markets are more volatile — this makes timing and sequence of returns a serious risk.
Based on these macro changes, safe withdrawal rates are falling with some studies suggesting 3% or less for sustainability. This is where dividend investing steps in ….
