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 of their savings lasting 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

Explanation: This calculates the initial safe withdrawal amount for the first year of retirement.

3. Importance of the 4% Rule

Details: The 4% rule helps retirees balance spending needs with portfolio longevity, providing a sustainable withdrawal strategy 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 not hold in all future scenarios.

Q2: Should I adjust withdrawals after the first year?
A: The original rule suggests adjusting for inflation each year, regardless of portfolio performance.

Q3: Does this work for early retirement?
A: For retirements longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate.

Q4: What asset allocation does this assume?
A: The original studies used a 50-75% stock allocation.

Q5: Are there alternatives to the 4% rule?
A: Yes, dynamic withdrawal strategies that adjust based on portfolio performance may be more flexible.