Compound Interest and Retirement
Compound interest is the most powerful force in retirement planning. Over 30 years, compound growth typically generates 2-4× more wealth than your actual contributions. Starting with $50,000 and adding $750/month at 7% yields $1,137,000 — but only $320,000 is your money. The other $817,000 is pure compound growth.
The 4% Safe Withdrawal Rate
The 4% rule is a widely-accepted guideline for sustainable retirement withdrawals. If your portfolio reaches $1,000,000, you can withdraw $40,000 in the first year ($3,333/month), adjusting for inflation each year. Historical data shows this approach sustains portfolios for 30+ years.