Důchod, renta a FIRE
How to Calculate Your Own Path to Financial Independence
Key takeaways
- Target portfolio = annual expenses divided by the target withdrawal rate (e.g. 4%).
- The result is an estimate, not a guarantee — returns and inflation both change.
- Sequence-of-returns risk can worsen the outcome even when the average return looks fine.
- Regular projections show where you stand on the journey and what to adjust.
- Start with uncertainty in mind: conservative numbers beat excessive optimism.
Your path to financial independence begins by setting your annual expenses, choosing a withdrawal rate, and dividing — the result is your target portfolio size. If you want to live on 40,000 CZK a month (480,000 CZK a year) and rely on a 4% withdrawal rate, you need 12 million crowns.
The Basic Calculation
The formula looks simple: target portfolio = annual expenses ÷ withdrawal rate. A 4% withdrawal rate means you take out 4% of portfolio value in year one. A lower rate (3 or 3.5%) gives a larger safety cushion; a higher rate (5%) raises the risk of running out of money before the end of your life.
- Monthly income 30,000 CZK → annual 360,000 CZK → at 4% you need 9 million CZK
- Monthly income 50,000 CZK → annual 600,000 CZK → at 4% you need 15 million CZK
- Want to use 3.5%? Multiply the result by a factor of 1.14
Where Uncertainty Hides
The calculation assumes constant returns, but markets don't work that way. The sequence matters: if a downturn hits right after you stop working, the portfolio may not recover — even if the average return is 7% a year. We call this sequence-of-returns risk — see the article sequence of returns.
Inflation is the second threat. If your expenses grow 3% a year and your portfolio earns 7%, the real return is only 4%. When inflation surprises, the cushion thins faster than you planned.
How to Verify Your Numbers
The best tool is the projection on Hřivna — enter your starting value, monthly contributions, time horizon, and expected return, and you see a probability range of outcomes. The advantage over a spreadsheet is that the projection simulates various scenarios, including the uncomfortable ones.
What to Do With the Result
Calculate the gap between what you have today and the target portfolio. Spread that gap across the years remaining, and you'll see how much to save monthly — more on that in the article how much to save monthly. If the number looks unrealistic, you have three levers: save more, work longer, or lower your planned retirement expenses.
FAQ
How do I calculate how much I need for retirement income?
Divide your annual expenses by your chosen withdrawal rate. At 40,000 CZK a month and a 4% rate, that's 12 million. The lower the withdrawal rate you choose, the larger the cushion — but the more you need to save.
Is the 4% rule reliable?
It is based on historical data from the US market over 30-year retirement horizons. For longer horizons (40+ years) or mixed global portfolios it is more prudent to assume 3–3.5%. The result is always an estimate, not a certainty.
Does the target amount change over time?
Yes. Inflation, lifestyle changes, and market performance all affect how much you ultimately need. That's why we recommend updating the projection every year — not once a decade.
What if the calculator gives me numbers that are too high?
You have three levers: save more, delay your retirement, or plan for lower expenses. A combination of all three is usually the most feasible path — each small change reduces the target amount.