Life as a CRNA

Rule of 25 (AKA Rule of 4%)

Let me preface that the figure that is calculated is based off the “rule of 25” or the “rule of 4%.” You can call it whatever you like. The premise behind calculating this number is that you will be able to withdraw 4% from your investment portfolio in perpetuity without ever touching your principal. This calculation also takes inflation into account. A lot of retirement calculators employ this rule when calculating a figure for you. Again, this is just a crude instrument to help you approximate how much you need to retire. For a detailed analysis of where this figure came from, read this. Though, of late, the viability of the 4% rule has recently come into question. Irrespective of the opinions, savings and retirement should be a priority for you and calculating a crude figure is at the minimum the least you can do in order prepare yourself for retirement.

A Few Assumptions

• As aforementioned, the figure is based off of the rule of 4%.
• I am merely calculating how much I am saving into my retirement funds. I am not including whatever money I am saving and investing in an after tax basis (i.e., brokerage fund accounts and other passive income streams).
• The IRS contribution limits remain fixed at $18,000 under the age of 49 and $24,000 over 50. Obviously, that will change as time moves forward, but for the time being, let’s make the calculation simple.
• My pension contributions remain fixed at $14,000.
• Retirement does not necessarily mean I quit work altogether. The figure I’ve calculated for myself just means I know I will no longer have to work full time and can pursue other hobbies (though I do that now and I seriously question one’s sanity if all you’re doing is working until you retire because what’s the point of it all if you don’t know how to balance your work with your personal pursuits…isn’t that why you became a CRNA? To make life easier and more enjoyable?).
• I am only calculating income I am receiving from my primary mode of employment. This does not include my forays into private practice, which I know contradicts my previous statement about work…and no, I’m not working for the sake of working. I basically approach private practice as a source to fund my leisurely activities, which of late, has been tons of traveling and picking up a new hobby (scuba diving).

Steps to Calculating a Retirement Figure

1. Calculate your gross monthly expenses
2. Multiply your monthly expenses by 12 to get the total of your annual expenses.
3. Take your annual expenses and multiply it by 25 (4% rule assumption) and voila, you’ve obtained your retirement figure.

My Retirement Figure

1. From my earlier post, my monthly expenditures is ~$4,300.
2. I calculated my annual expenses to be ~$52,000 ($4,300 x 12 months). I’m aware that this figure includes my student loan payments, which constitutes ~$21,000 of the $52,000 I calculated. However, even after I finish paying off my loans, my intention is to pocket the difference and apply it towards a brokerage account.
3. $52,000 x 25 = $1,300,000 is what I need to reach financial independence. This figure is using today’s dollars. It’s not adjusted for inflation. Using the Bureau of Labor Statistics CPI Inflation Calculator, my calculated figure is closer to $2.15 million.

So How Much Longer Do I Have To Work?