1. What is the 4% Rule?

The 4% rule is a retirement withdrawal strategy that suggests retirees can safely withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, with a high probability of not outliving their savings.

2. How Does the Calculator Work?

The calculator uses the simple 4% rule formula:

Where:

• Portfolio Value — Total retirement savings
• 0.04 — The 4% withdrawal rate

Explanation: This simplified version calculates just the first year's withdrawal amount based on the 4% rule.

3. Importance of Withdrawal Rate

Details: Choosing an appropriate withdrawal rate is crucial for retirement planning to ensure your savings last throughout retirement while maintaining your desired standard of living.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in dollars. The calculator will show the amount you could withdraw in the first year of retirement following 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 doesn't guarantee future results, but it's a commonly used starting point for retirement planning.

Q2: Should I adjust for inflation?
A: The full 4% rule includes annual inflation adjustments, but this simplified calculator only shows the first year's withdrawal.

Q3: Does the 4% rule work for early retirement?
A: Longer retirement periods may require more conservative withdrawal rates, as the original 4% rule was based on 30-year retirement periods.

Q4: What asset allocation does this assume?
A: The original studies used a portfolio of about 50-75% stocks, with the remainder in bonds.

Q5: Are there alternatives to the 4% rule?
A: Yes, other approaches include dynamic withdrawal strategies, guardrail approaches, or using annuity products for part of your income.