Home
Back
Bankrate Withdrawal Formula:
| From: | To: |
The Bankrate withdrawal strategy is based on the 4% rule, which suggests that retirees can safely withdraw 4% of their initial retirement portfolio balance annually, adjusted for inflation, without running out of money over a 30-year retirement period.
The calculator uses the Bankrate withdrawal formula:
Where:
Explanation: This calculation provides the initial annual withdrawal amount that can be adjusted for inflation in subsequent years while maintaining a high probability of not depleting retirement funds over a 30-year period.
Details: Determining a sustainable withdrawal rate is crucial for retirement planning as it helps ensure that retirees don't outlive their savings while maintaining their desired standard of living throughout retirement.
Tips: Enter your total retirement savings in currency units. The calculator will determine your safe initial annual withdrawal amount based on the 4% rule.
Q1: Is the 4% rule still valid today?
A: The 4% rule is a guideline based on historical market data. Some experts suggest a more conservative approach (3-3.5%) given current market conditions and longer life expectancies.
Q2: Does this account for inflation?
A: The 4% rule includes an inflation adjustment. After the first year, you would increase your withdrawal amount annually to account for inflation.
Q3: What investment portfolio is this based on?
A: The original research assumed a portfolio of 50% stocks and 50% bonds, though many variations have been studied.
Q4: How does market volatility affect this strategy?
A: Significant market downturns early in retirement can impact the success of this strategy, which is why some advisors recommend flexible withdrawal approaches.
Q5: Should I use this for all my retirement income planning?
A: This is a guideline, not a guarantee. It should be part of a comprehensive retirement plan that considers your specific circumstances, other income sources, and potential healthcare costs.