Snowballr · Cheat sheet
Retirement & 4% rule cheat sheet
The 25x shortcut, a 4% initial withdrawal assumption, and how to size a target.
For: Pre-retirees and FIRE pursuers · Source: snowballr.io/cheat-sheets/retirement-4-percent-rule
Core numbers
- 25x annual spending = a target at an assumed 4% initial withdrawal rate
- 4% of a portfolio is an arithmetic year-one withdrawal amount, not a guarantee
- Historical studies tested defined portfolios and periods; results are not future probabilities
- Outcomes depend on the study assumptions; no withdrawal rate is universally safe
Sizing your number
| Annual spend | Target at 25x (4% assumption) | Initial amount at 4% |
|---|---|---|
| $40,000 | $1.0 M | $40,000 |
| $60,000 | $1.5 M | $60,000 |
| $80,000 | $2.0 M | $80,000 |
| $100,000 | $2.5 M | $100,000 |
| $150,000 | $3.75 M | $150,000 |
FIRE variants
- Lean FIRE: a label for a lower-spending target; definitions vary
- Regular FIRE: a label for a financial-independence target; definitions vary
- Fat FIRE: a label for a higher-spending target; definitions vary
- Coast FIRE: enough may be invested for a target date under chosen assumptions, without further contributions
- Barista FIRE: part-time work may cover some spending while investments remain invested
Sequence-of-returns risk
When withdrawals continue during a market decline, poor early returns can affect a portfolio differently from the same returns later. The effect depends on the withdrawal plan, allocation and ability to adjust; no single cash buffer or guardrail suits everyone.
Decision rules
- Compare multiple initial withdrawal assumptions over the intended horizon; longer horizons carry more uncertainty.
- Consider liquidity needs, health-care costs, taxes and investment costs when modeling a personal plan.
- Revisit the assumptions when your portfolio, spending or plans change.
- Health-care costs are one of several costs to estimate for retirement.