What You Need To Know About Financial Independence Day

Not a day goes by without social media reminding us that it is a day to celebrate some holiday. It varies from Pay A Compliment Day (February 6) to Take A Starving Artist Out To Lunch Day (July 2).

Why 425 and what is the significance of this number to Financial Freedom? 4 Percent Rule? William Bengen, a retired financial adviser first articulated 4% as a rule of thumb for withdrawal rates from retirement savings.

Rule of 25X Based on the 4 percent rule; we can reverse engineer how much we need to have saved before we can say we have achieved Financial Freedom and can live exclusively on our investments passively.

1. The initial studies were based on shorter retirement spans and not tested for early retirement type of scenarios where one needs to generate passive income from their portfolio for six to seven decades.

Criticism of the 4 percent rule

2. Stock markets by their nature are volatile and over a period of time while we do get average returns; often we would have wild swings one year to the next.  This introduces “Sequence of Returns” risk which basically means that the order in which a retiree experiences up and down years is important.

Why am I celebrating Financial Independence Day?

I have mentioned earlier how the book “Your Money or your Life” by Vicki Robin changed my outlook and gave purpose to my savings.  The unfortunate part is that all of us have limited life span. As we grow older, we realize that time is the most precious resource and no one can generate more time.

How much time is available to be spent with others? Wait but why has an excellent post which actually measures time in terms of activities or events; instead of an arbitrary unit such as years.

“When you look at that reality, you realize that despite not being at the end of your life, you may very well be nearing the end of your time with some of the most important people in your life. If I lay out the total days, I’ll ever spend with each of my parents—assuming I’m as lucky as can be—this becomes starkly clear”

As an immigrant who came to this country to build a new life for myself; I’ve had to sacrifice a number of years which could have been spent with my parents had I continued to live close to them instead of relocating across the seven seas.

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