In this retirement podcast episode, Jason gives you the formulas you can use to determine if you have achieved financial independence. The formulas discussed are as follows:
Guaranteed annual income + 3.5% of your retirement assets divided by your essential expenses.
Sound Retirement Income Score
Guaranteed income divided by your essential expenses =
Retirement Savings Ratio
Essential expenses – guaranteed income = portfolio withdrawals.
Portfolio withdrawals x .035 if assuming a 3.5% withdrawal rate or x .040 if assuming a 4% withdrawal rate. Have you saved enough?
Debt To Assets Ratio
Total debt divided into total assets. Ideally debt is 20% or less of total assets.
Withdrawal % throughout retirement
Does your withdrawal % remain below 4% throughout retirement?
Millionaire Next Door Formula
multiply your age times your gross annual household income and then divide by 10:
65 x 120,000 = $7,800,000 /10 = $780,000
65 year old who is earning 120k per year would be as follows: 65x($120,000/10) = 120,000/10= $12,000 x 65 = $780,000