The formula to calculate the annual retirement income (RI) based on the 3 Percent Rule is:
\[ \text{RI} = \text{P} \times \text{r} \]
Where:
The 3 Percent Rule for retirement is a guideline that suggests a retiree should withdraw no more than 3% of their retirement savings during the first year of retirement. Each subsequent year, the withdrawal amount is adjusted for inflation. This rule is designed to ensure that the retiree’s savings last for at least 30 years. It is a more conservative approach compared to the commonly referenced 4% rule.
Let's assume the following value:
Using the formula to calculate the annual retirement income (RI):
\[ \text{RI} = \text{P} \times \text{r} = 1,000,000 \times 0.03 = 30,000 \text{ dollars} \]
The annual retirement income (RI) is $30,000.
