1. What is the Rule of 40?

The Rule of 40 is a principle that states a healthy company's combined revenue growth rate and profit margin should equal or exceed 40%. Adapted for retirement planning, it helps assess the balance between growth and sustainability of your retirement portfolio.

2. How Does the Calculator Work?

The calculator uses the Rule of 40 formula:

Where:

• Revenue Growth (%) - The percentage increase in your retirement income sources
• Profit Margin (%) - The percentage of income remaining after expenses

Interpretation: A score of 40 or higher suggests a healthy balance between growth and sustainability in your retirement planning.

3. Importance for Retirement Planning

Details: The Rule of 40 adapted for retirement helps evaluate whether your retirement strategy has the right balance between income growth and financial sustainability.

4. Using the Calculator

Tips: Enter your retirement income growth percentage and estimated profit margin (income after expenses as percentage of total income). The calculator will sum these values to give your Rule of 40 score.

5. Frequently Asked Questions (FAQ)

Q1: How is this adapted for retirement planning?
A: Instead of company metrics, we use personal retirement income growth and expense ratios to assess financial health.

Q2: What's a good Rule of 40 score for retirement?
A: Similar to business, 40+ is excellent, 30-40 is good, below 30 may indicate need for adjustments.

Q3: How often should I calculate this?
A: Annually, or whenever your income/expense situation changes significantly.

Q4: What if my score is below 40?
A: Consider ways to increase income growth or reduce expenses to improve your financial sustainability.

Q5: Does this replace comprehensive retirement planning?
A: No, it's one metric among many, but a useful quick check on your financial balance.