1. What Is the 4% Withdrawal Rule?

The 4% rule is a retirement withdrawal strategy that suggests retirees can safely withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, with a high probability the money will last 30 years.

2. How the Calculation Works

The calculator uses the simple formula:

Where:

• \( Portfolio \) — Total retirement savings value
• \( 0.04 \) — The 4% withdrawal rate

Explanation: This calculates your first year's safe withdrawal amount based on the 4% rule of thumb.

3. Importance of the 4% Rule

Details: The 4% rule helps retirees balance spending needs with portfolio longevity, reducing the risk of outliving savings while maintaining a reasonable standard of living.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in dollars. The calculator will show your recommended first-year withdrawal amount.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule guaranteed to work?
A: No, it's based on historical market performance and may need adjustment based on future market conditions and individual circumstances.

Q2: Should I withdraw 4% every year?
A: The rule suggests adjusting the initial amount by inflation each year, not taking 4% of the current portfolio value annually.

Q3: Does this account for taxes?
A: No, withdrawals may be subject to taxes depending on account types and tax laws in your jurisdiction.

Q4: What asset allocation does this assume?
A: The original study assumed a 50-75% stock allocation. Different allocations may affect success rates.

Q5: Is 4% still valid with today's low interest rates?
A: Some experts suggest a lower initial withdrawal rate (3-3.5%) may be more appropriate in low-return environments.