It’s based on the 4% rule, which is a rough guide to estimate how much you need for retirement based on a given expenditure. It assumes a very conservative investment return of 4%, which is not difficult to achieve. So you take your annual expenditure and multiply by 25. That amount invested means that 4% investment returns will cover your projected expenditure.
40-year
The retirement fund we need, I see your formula that you multiply by 25. Why 25?
It’s based on the 4% rule, which is a rough guide to estimate how much you need for retirement based on a given expenditure. It assumes a very conservative investment return of 4%, which is not difficult to achieve. So you take your annual expenditure and multiply by 25. That amount invested means that 4% investment returns will cover your projected expenditure.