Here’s the cheat sheet to generating passive income from your portfolio.
Lesson #1: The 4% rule is dead: Basing your income on a withdrawal percentage of your portfolio will get
you into trouble. At some point you’ll need to decide between maintaining your lifestyle or withdrawing
too much. (Neither is a good option.)
Lesson #2: The Two-Bucket System: Instead, divide your money into two buckets. One for living. One for
growth.
Lesson #3: Bottomless Paychecks: For your living bucket, set aside 10 years of paychecks. 2 years in cash.
8 years in bonds.
Lesson #4: Replace your Paychecks: As your living bucket depletes, refill it during the “good” years from
your growth bucket.
It’s just that simple. Once you know the mechanics, you can calculate how much you need to retire. How
much you need to maintain your lifestyle…
…and how SOON you can retire!
