Mostly fixed. We do have to factor in inflation dynamics (which is thankfully low at the moment), future health costs, family needs, etc. So, I'd say allow for a +20% variation in the goal (1 mil for example ought to be 1.2 mil). Of course, I'm still learning
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I think you’ll sleep better with a tiered approach that’s not relying on inflation or wishful thinking about the unexpected.
You need active sources of income that pay on a regular basis in addition to holdings which provide additional earnings. The easiest way to broach this is with a tiered approach which leverages your expertise.
This needn’t relate to your professional experiences, but it should be a subject you’re conversant in and passionate about discussing. For the sake of this discussion, let’s assume it’s real estate.
The principle of retirement has been misrepresented to the populace. A modest understanding of math coupled with the realities of cost of living increases and rising medical expenses due to age should reveal the challenge of pinning down a number. At best you’re guessing unless you began with a large influx of cash or expect a legacy from a relative.
Wealthy people don’t retire. The concept is broached differently. You begin by determining the monetary level you need to have on a regular basis. This number is important. It impacts your time assignments, activities and investments. Working capital is always a factor. It is never constructed with a stationary number that’s dependent on interest rates. That’s the bonus. It’s rarely the main source.
Let’s assume your ideal is $5 million per annum. By choosing a yearly outcome you’ll leverage your activities and have little difficulty making adjustments when required. None of this matters if you don’t embrace the necessity of minding your money. You are always the CEO of your finances. Don’t pass the responsibility on to someone else. They don’t bear the consequences of their mistakes. You do.
Take your yearly number and divide it by 52. This provides a weekly target. The next step is where retirement goes awry. You don’t remove your hand from the plow. You reduce your time plowing. In other words, the next number is dependent on the reduced hours you want to devote to maintaining your working capital.
If you’ve decided that 20 hours is your sweet spot that becomes your guideline. Therefore, $5 million annum would reflect $97,000 (rounded up) of weekly income. Divided by 20 hours of maintenance equals a $4,900 (rounded up) target. This is your ROI.
You would limit yourself to activities that generate this number. This is why many professionals write books and give speeches. Books are a bypath to the speaking circuit. They’re leveraging their knowledge and building a customer base through their actions that will support future endeavors. You could do the same with a podcast or video whose intended goal are apps and other products. Scale counts.
The 20 hour investment generates ‘working capital’ which funds multi-term investments without depreciating your principle. This is the number the wealthy live on. They don’t burn through their savings and needn’t fear the unexpected because their activities are strengthening the nest and funding future legacies and charitable gifts.
That’s why their estates are so plentiful upon death.
