FIREDesk
Free guide · 4 min read
How much do you need to retire? And what to do this month
One number, three things that matter and a checklist. Written by someone who started knowing nothing about investing six years ago, and whose portfolio has doubled since.
1Your number
A common rule of thumb: multiply your yearly spending by 25. It comes from withdrawing about 4% of a diversified portfolio each year. It is a starting point, not a guarantee: it depends on markets, taxes, how long the money must last and what you do in bad years.
A rule of thumb, not a forecast. Nothing is stored or sent.
Two ways to move the number: spend less (it lowers the target and raises what you can save) or earn more. Both are usually bigger levers than finding a better investment.
2At the start, saving beats returns
Saving for 20 years at a constant yearly return (real returns are not constant; this only compares):
| Plan | After 20 years |
|---|---|
| Save $6,000 a year, 5% a year | about $198,000 |
| Save $3,000 a year, 10% a year | about $172,000 |
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3Costs are a quiet drain
Same $6,000 a year for 20 years at 5%: about $198,000. If costs take one percentage point a year (a 4% net return) you end with about $179,000, roughly $20,000 less, for doing nothing wrong. Always look up the yearly cost (often called TER) of anything you buy. The ETF cost guide has a calculator for it.
4Before you invest
- An emergency fund of three to six months of expenses, so you are never forced to sell at a bad moment.
- No expensive debt. Paying off a high-interest debt is a sure return no market can promise.
- A worst case you can live with. Markets fall, sometimes by a third or more, and recoveries can take years. Only money you can leave invested through that belongs in the market.
- A scam filter. A promised return, pressure to act fast, a stranger who contacts you first or a private group showing profit screenshots: stop. Real investing is slow and boring.
5What to do this month
- Write down your yearly spending and your number from the calculator.
- Check how much of your income you save and pick a rate you can keep.
- Build or check your emergency fund.
- Find the yearly cost of every fund or product you hold.
- Write what you will do if your portfolio falls 30%.
Next step
Before you pick a fund, find out how much you can afford to lose. With ETF Lab you choose the biggest fall you could sit through and see which splits between stocks and bonds stayed within it in the past. It is free.
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Legal. FIREDesk content is for educational purposes only and is not financial advice. FIREDesk does not give personal recommendations. Investing involves significant risk, including the loss of the money invested. Examples use constant returns for illustration only; real returns vary and past results do not guarantee future performance. The author's own portfolio result is personal, not audited, not typical and not a forecast. Tax treatment depends on your country. You are responsible for your own decisions. Disclaimer · Privacy