Can You Live Off Your Investments? How to Know

Also important is a framework for how you’ll withdraw money from your taxable and tax-advantaged investment accounts. Whether you work with an advisor or on your own, it’s often wise to adhere to an annual percentage as a general rule, such as 3% or as much as 5%, depending on what’s feasible for you. This serves as your annual income to use for essential needs and discretionary expenses, while shielding you from depleting your portfolio too quickly.

Keep in mind, however, that these percentages are hardly ever one-size-fits-all. “Those rules can be useful guardrails, but they’re not commandments,” says Drew Lunt, founder and advisor at Scratch Capital. It’s important to understand that surprises should be expected and to establish your annual withdrawal rate with that in mind. “The only guarantee is that something unexpected will happen. Your plan has to survive that,” adds Lunt.