1. What is the Four Percent Rule?

The Four Percent Rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, without running out of money for at least 30 years.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Portfolio \) — Total retirement savings in dollars
• \( 0.04 \) — The 4% withdrawal rate (4% = 0.04 in decimal form)

Explanation: The calculation provides the first year's safe withdrawal amount based on your total portfolio value.

3. Importance of the 4% Rule

Details: This rule helps retirees determine a sustainable spending rate that balances current lifestyle needs with long-term financial security.

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: Where did the 4% rule come from?
A: It originated from the 1994 "Trinity Study" which analyzed historical market returns and withdrawal rates.

Q2: Is 4% still considered safe today?
A: Some experts suggest 3-3.5% may be more appropriate given current low interest rates and high valuations.

Q3: Does this account for taxes?
A: No, the withdrawal amount is pre-tax. You'll need to account for taxes separately.

Q4: What asset allocation is assumed?
A: The original study assumed a 50-75% stock allocation.

Q5: How should I adjust for inflation?
A: After the first year, increase your withdrawal amount by the inflation rate each year.