1. What is the 4% Withdrawal Rule?

The 4% withdrawal rule is a retirement planning guideline that suggests retirees can 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 Does the Calculator Work?

The calculator uses the simple formula:

Where:

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

Explanation: This calculates the safe initial annual withdrawal amount based on your total retirement savings.

3. Importance of the 4% Rule

Details: The 4% rule helps retirees determine a sustainable spending rate that balances current needs with preserving assets for later years, based on historical market returns.

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 for extreme market conditions or longer retirement periods.

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 annually.

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 does this assume?
A: The original studies used a 50-75% stock allocation. More conservative allocations may require a lower withdrawal rate.

Q5: Is the 4% rule still valid today?
A: With lower expected returns, some experts suggest a 3-3.5% withdrawal rate may be more appropriate currently.