Home
Back
4% Rule Formula:
| From: | To: |
The 4% rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their retirement savings in the first year of retirement, with subsequent annual withdrawals adjusted for inflation. This strategy aims to provide sustainable income throughout retirement.
The calculator uses the 4% rule formula:
Where:
Explanation: This calculation provides the initial safe withdrawal amount from your retirement portfolio in the first year of retirement.
Details: Proper retirement income planning is crucial for maintaining financial security throughout retirement years. The 4% rule provides a conservative starting point for determining sustainable withdrawal rates from retirement savings.
Tips: Enter your total retirement savings in currency units. The calculator will compute your recommended initial annual withdrawal amount based on the 4% rule.
Q1: Is the 4% rule guaranteed to work?
A: The 4% rule is based on historical market data and is considered a conservative guideline, but it's not a guarantee. Market conditions, inflation rates, and individual circumstances can affect its success.
Q2: Should I adjust withdrawals for inflation?
A: Yes, the 4% rule typically assumes you'll adjust your annual withdrawals for inflation in subsequent years to maintain purchasing power.
Q3: Does this work for all retirement portfolios?
A: The rule was originally based on a portfolio of 50% stocks and 50% bonds. Different asset allocations may require different withdrawal strategies.
Q4: What if I have other income sources?
A: If you have pension income, Social Security, or other reliable income sources, you may be able to adjust your withdrawal rate accordingly.
Q5: How long will my money last with the 4% rule?
A: Historical simulations suggest the 4% rule has a high probability of sustaining retirement income for 30 years, though individual results may vary.