1. What is the 4% Withdrawal Rule?

The 4% withdrawal rule is a retirement planning guideline suggesting that retirees can withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, with a high probability of funds lasting 30 years.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• Portfolio Value — Total value of retirement savings
• Withdrawal Rate — Percentage to withdraw annually (typically 3-5%)

Explanation: This calculation provides a simple estimate of sustainable retirement withdrawals based on historical market returns.

3. Importance of Withdrawal Rate

Details: Choosing an appropriate withdrawal rate is crucial for ensuring retirement funds last throughout retirement while maintaining desired lifestyle.

4. Using the Calculator

Tips: Enter your total retirement portfolio value and desired withdrawal rate (default is 4%). The calculator will show annual and monthly withdrawal amounts.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule still valid today?
A: While still a useful guideline, some experts suggest a more conservative 3-3.5% withdrawal rate in today's low-yield environment.

Q2: Does this account for taxes?
A: No, withdrawals may be subject to taxes depending on account types (taxable, tax-deferred, or tax-free).

Q3: Should I adjust for inflation?
A: The classic 4% rule includes annual inflation adjustments, but this calculator shows only the first year's withdrawal.

Q4: What about investment returns?
A: The 4% rule assumes a balanced portfolio that grows enough to support inflation-adjusted withdrawals over time.

Q5: How should I adjust for different retirement lengths?
A: Longer retirements may require lower withdrawal rates, while shorter periods may allow higher rates.