1. What is the 4% Rule?

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

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Portfolio \) — Your total retirement savings in dollars
• \( 0.04 \) — The 4% withdrawal rate

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

3. Importance of Safe Withdrawal Calculation

Details: Proper withdrawal rate calculation helps ensure your retirement savings last throughout your retirement years while maintaining your desired lifestyle.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in dollars. The value must be positive.

5. Frequently Asked Questions (FAQ)

Q1: Where does the 4% rule come from?
A: It originated from the 1994 Trinity study which examined historical market returns and withdrawal rates.

Q2: Is the 4% rule guaranteed to work?
A: No, it's based on historical data and provides a high probability (not certainty) of success over 30 years.

Q3: Should I adjust the withdrawal amount over time?
A: The traditional 4% rule suggests adjusting for inflation each year, but some advocate for flexible spending strategies.

Q4: Does the 4% rule work for early retirement?
A: For retirements longer than 30 years, a lower initial withdrawal rate (3-3.5%) may be more appropriate.

Q5: What factors might require adjusting the 4% rule?
A: Market conditions, portfolio composition, retirement duration, and personal circumstances may all warrant adjustments.