4. Calculate the Ending Balance You Need to Support the Inflated Income Figure
From Step 3, you now know how much money you’re going to need every month to support your lifestyle 25 years in the future. The next question is this: “How much investment capital will I need 25 years from now to support my desired monthly income when I’m ready for financial independence day?”
As you take this step, remember that you may not be spending any of the investment capital itself 25 years from now. It will simply be there to generate interest and capital appreciation sufficient for you to draw your required $15,700 per month. A reasonable assumption is that you can draw an amount equal to 5% of your capital each year without jeopardizing your future.