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Once you have a clear goal, it’s vital to understand how much capital you will need to reach it. The concept operates on a principle known as the Safe Withdrawal Rate, often set at about 4%. This means if you aspire to earn $100,000 annually in passive income, you'd need to accumulate approximately $2.5 million invested safely.
For example, if you want $50,000 a year, this correlates to needing around $1.25 million. By identifying your target figure, you're better positioned for the journey ahead.