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The “4% Rule” is commonly referenced in this context, suggesting that one can withdraw 4% of their total savings annually. In this case, a million-dollar nest egg might provide a modest annual income of $40,000. However, with inflation factored in, these savings could last even less than 25 years. If a yearly withdrawal increases alongside inflation, your money could last anywhere from 21 to 25 years, significantly undercutting your financial security.
The Power of Investment: Making Your Money Work for You
Instead of relying solely on cash savings, adopting an investment mindset can significantly enhance your financial standing. With investments in something like dividend-paying stocks, you can create passive income streams while allowing your money to grow.