The Four-Percent Rule

In Money for Something, we talk about viewing wealth in terms of the income it can generate — i.e. in terms of the four percent rule.

Based on a number of studies to determine a reasonable “draw-down” rate for retirees, there’s a rule of thumb which states that if you withdraw no more than four percent of your sensibly-invested savings per year, you’ll likely never run out of money.

So, if you could live on $40,000 per year, then you’d be financially free once you’d saved and invested an amount of one million dollars — regardless how old you are.

Interestingly, this rule of thumb can also be used in reverse.

The other day I was speaking with a retired couple who, from their employer-provided individual retirement plans (to which they contributed during their working careers), receive about $6,000 per month, for as long as they live. Talking to them, it was interesting to hear the husband ponder what he’d do, if he were “a millionaire”.

Well, in a sense, he is!

Based on the four-percent rule, how much would you need to have saved to generate an income of $6,000 per month? — $1,800,000!

Understanding how to view wealth is just one of several important aspects of money management. For a complete and easy-to-read introduction, be sure to pick up a copy of Money for Something today.

People just want to want to know what to do

My new book, Money for Something teaches the fundamentals of investing, and hopefully motivates the reader that they should be investing.

The actual act of investing, though, requires making a personal and very important decision — the choice of the particular “asset allocation” in which to invest. The book, and its companion website, provides a handful of popular allocations that should work well for most people.

When wrapping up that particular chapter, though, it occurred to me that when I’ve read such books in the past, I’ve always ended up thinking, “I sure wish that in addition to giving me the information necessary to make a decision, the author had also described the decision they took!”. And so I decided to go one step further, and conclude the chapter with a short note about “what I do”, in which I describe my own asset allocation, known as the Permanent Portfolio.

As it turns out, the great majority of emails I’ve received from readers getting started with their own investment program have chosen to invest in the Permanent Portfolio, and I think that’s worth of a bit of reflection.

Whether we are product designers, lawyers, tax advisors, or writers, it’s easy to assume that the job-to-be-done is providing the information or tools necessary for our users to make decisions. In reality, though, the job-to-be-done in the mind of our users is to make the right decision, and we can support that objective by taking our services one step further, with a suggestion, recommendation, perhaps thoughtful defaults settings, or in the case of my book, a section called, “What I do.”

Money for Something—One month after the book launch

My new book, Money for Something, has been out for about a month, and I wanted to post a note about my experience during that time.


The feedback so far has been overwhelmingly positive, and in that regard I’ve been thrilled by three things:

  • The diversity of background. I’ve been contacted by people from all walks of life—including designers, engineers, executives, parents, grandparents, university finance professors, philosophers and even coaches of Mixed Martial Arts!

  • The diversity of geography. It was my hope to attract a global audience, and that’s happened. It’s really exciting to hear from people in Australia, Canada, Switzerland, Spain, Austria, Germany and Mexico, who are all finding local ways to implement the investment strategy outlined in the book.

  • The success stories. One particular person in the United States, with whom I’ve been working closely has, as a result of learning about the devastating consequences of high-cost investments, rolled over his retirement investment account from something costing 2.5% per year, to one costing 0.5% per year. Over his expected investing lifetime and savings rate, that alone will save him literally hundreds of thousands of dollars. (I plan to write a case study about this guy soon.)

It’s a deeply gratifying feeling to have created something that will have a meaningful and positive impact in people’s lives. I’ve always been proud of our work, but I have to say this is a new, and special feeling.

User experience is about the whole experience

Apart from the comments about the book itself, I’ve also received several compliments on the design of the book website, and the simplicity and efficiency of its checkout process and follow-on gifting workflows. For that, I owe all the credit to my incredible teammates Alex Bendiken and Justin Driscoll at Makalu Interactive

Positioning of the book

My objective for the positioning of this book was the following:

It’s a first introduction to investing.

While there are some great books out there about investing, a selection of which I recommend at the book website, I believe they are more appropriate as follow-on books to Money for Something; books to be read once the reader is convinced that they need to invest, and are going to invest.

In fact, I believe readers of those books, who have started with Money for Something, are more likely to actually finish reading them, and less likely to get side-tracked by some of the complexities.

So what are the goals of a first introduction? In writing this book, mine were:

  1. Make it short and concise, so that the reader is likely to finish it without putting it down. I would say most of the effort in writing the book was on taking things out, and simplifying.

  2. Make it complete enough, so that if the reader only reads my book, they’ll have enough knowledge to understand why they should be investing, and to implement a solid investment plan.

  3. Focus on the essential concepts which are universally accepted, to avoid the risk of the reader getting sidetracked by issues which are contextual (such as taxation).

  4. Tell the story of investing in such a compelling way that the reader, upon finishing the book, will be motivated enough to actually start investing.

In short, I want you to read the whole book, start investing, and stick with it!

The feedback I’ve gotten seems to confirmed these goals. Folks appreciate the “no fluff” concise writing style, and those who’ve written me seem very motivated to get started investing (and many report they have!)

By the way, regarding those interesting follow-on books, one was just released today. In my book, I discuss the long-term importance of the asset allocation and briefly mention the particular one I follow, called the Permanent Portfolio. Today, Craig Rowland’s anticipated new book, which goes into great depth about this particular allocation, has been released in Kindle format.

The next phase…

Several readers have contacted me with questions that, while outside the scope of the book, lead naturally from it. I’m currently considering how to address this follow-on interest and need — whether pointing people to the follow-on references, providing some opinion and help, starting a blog in which I write about some of the common questions, etc.


After a month, I’m absolutely convinced that Money for Something is uniquely positioned, broadly needed, and represents a tremendous value for its intended audience. That audience is itself very broad, and our challenge now is to reach it. For the moment, we’re relying on word-of-mouth — and let me extend a huge “Thank you!” to those of you who’ve beeen gracious enough to help! 🙂

So we’re searching for ideas about how to further and more broadly get the word out. If you have any, I’d love to hear from you. 🙂

Coming up next, I plan a series of articles about the process itself of creating and self-publishing an electronic book. It’s a topic of interest right now, and I hope to share the details of our experience.

How much should you learn about investing?

Many years ago, I learned the fundamentals of investing, and over two decades of consistently following them, confirmed that (at least for me) they worked exactly as advertised. Over the years, though, a questions I’ve asked myself many times is how much investing knowledge should the average person have? Have I learned more than necessary? Have I not learned enough?

Continue reading How much should you learn about investing?