Passive Income

Passive Income

We recommend that you save at least $3,000,000 across your investment accounts before you consider heading off into "retirement". Additionally, you should have no more debt to pay down (besides maybe your mortgage).

This is so that you can take out 9% of your retirement accounts to live off of $270,000 —9% of $3,000,000—each year (not adjusted for inflation) to be financially independent.

The most common definition of financial independence is "is that someone has enough wealth to live as they wish for the rest of their life without having to work" [1].

Financially independence means, in essence, that you can do what you want with your time without any regard to money.

Since the average US inflation has averaged 3.2% per year [1], your 9% withdrawal from your investment accounts will translate to $122,331 in 2040, $89,104 in 2050, and $64,902 in 2060.

This is why we recommend at least $3,000,000 dollars saved before considering retirement. If you'd like to see how much your money will be worth on the day of your retirement, click here.

The more you save before heading out to retirement, the more passive income you will have. Make sure that you start out with a lot!

Passive income is "income that requires little to no effort to earn and maintain" [1].

Once you have accumulated the amount of money you wish to retire on and still have M1 Finance, take out 0.75% each month—9% each year—from your retirement accounts (IRA and 401k). You will only take out this much each month for the same reason that you only added a portion of your income per month to your saving accounts: Minimizing risk.

By having a fixed withdrawal every month, you make sure that you don't take out too much money at once during an economic dip or right before an economic boom.

Of course, the total value of your investment portfolio(s) will go down! Remember that you have now stopped adding money to it at this point and are withdrawing money instead. Again, make sure that you have enough money saved before you start.

Once you switch to the retirement plan, you can safely take out 9% each year of your investment accounts each year until the day you die while still having money left over for your descendants.

If you have any taxable investment accounts, you can also take out 9% every year for some extra cash to play with in retirement. In order to get notified when we update this page, make sure that you are signed up for the newsletter below:

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