5 Questions to Ask Before Early Retirement

3. Have I Adjusted for Inflation?

Inflation has an yearly average rate of 3%, as central banks actively target this rate. You should ensure that your retirement fund is inflation-proof.

For this purpose, you can employ the 4% rule. How it works is that in the first year of retirement, you’d withdraw only 4% of your retirement portfolio and then adjust the percentage of withdrawal based on the inflation rates for the subsequent years. 

For example, say you have $1 million in your total retirement investments, you’d draw $40,000 for the first year of retirement, and then if inflation is 3% in the following year, you raise the amount you withdrew in the previous year by 3%, taking out $41,200 in the present year.