1. What is the 4% Withdrawal Rule?

The 4% withdrawal rule is a retirement planning guideline suggesting that retirees can safely withdraw 4% of their portfolio annually, adjusted for inflation, without running out of money over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the simple 4% rule formula:

Where:

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

Explanation: The rule assumes a balanced portfolio (typically 60% stocks/40% bonds) and aims to provide sustainable income throughout retirement.

3. Importance of the 4% Rule

Details: This rule helps retirees determine a sustainable spending rate to avoid outliving their savings while maintaining their principal balance over time.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in dollars. The calculator will show your safe annual withdrawal amount based on the 4% rule.

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 different market conditions or longer retirements.

Q2: Should I withdraw exactly 4% every year?
A: The rule suggests starting at 4% in year one, then adjusting for inflation each subsequent year.

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

Q4: Is 4% appropriate for all ages?
A: Younger retirees may need a more conservative rate (3-3.5%) for longer retirement periods.

Q5: What if my portfolio grows significantly?
A: Some strategies allow increasing withdrawals if portfolio performance exceeds expectations.