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 their savings 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% safe withdrawal rate

Explanation: This calculation determines your first year's safe withdrawal amount based on your total retirement portfolio.

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 still valid today?
A: While debated, it remains a useful starting point, though some experts suggest a more conservative 3-3.5% withdrawal rate in today's low-yield environment.

Q2: Does the 4% rule account for inflation?
A: Yes, the original rule includes annual inflation adjustments after the first year.

Q3: What portfolio composition does this assume?
A: The original study assumed a 50-75% stock allocation with the remainder in bonds.

Q4: How long will my money last with 4% withdrawals?
A: Historically, this approach had a 95% success rate over 30 years, though results vary by market conditions.

Q5: Should I adjust withdrawals based on market performance?
A: Some experts recommend flexible spending rules that adjust based on portfolio performance for better longevity.