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Fidelity Withdrawal Formula:
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The Fidelity 4% rule is a guideline for retirement savings withdrawal that suggests withdrawing 4% of your initial retirement portfolio balance in the first year of retirement, with subsequent annual adjustments for inflation.
The calculator uses the Fidelity withdrawal formula:
Where:
Explanation: This rule is designed to help retirees determine a sustainable withdrawal rate that allows their savings to last throughout retirement.
Details: Proper withdrawal planning is essential for ensuring that retirement savings last throughout one's lifetime while maintaining a desired standard of living.
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 still valid today?
A: The 4% rule is a general guideline, but individual circumstances may vary. Market conditions, life expectancy, and spending needs should all be considered.
Q2: Should I adjust my withdrawal for inflation?
A: Yes, the rule typically suggests adjusting the withdrawal amount annually for inflation to maintain purchasing power.
Q3: What if my portfolio performance differs from historical averages?
A: You may need to adjust your withdrawal rate if market performance significantly deviates from historical averages used in the original study.
Q4: Does this rule work for all types of 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.
Q5: Should I consult a financial advisor before using this rule?
A: Yes, it's always recommended to consult with a financial professional who can consider your complete financial picture and personal circumstances.