1. What is the 4% Rule?

The 4% rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their retirement savings annually, adjusted for inflation, without running out of money for at least 30 years.

2. How Does the Calculator Work?

The calculator uses the 4% rule formula:

Where:

• \( S \) — Retirement savings (currency units)
• \( 0.04 \) — 4% withdrawal rate

Explanation: The rule assumes a balanced portfolio of stocks and bonds and aims to provide sustainable income throughout retirement.

3. Importance of the 4% Rule

Details: The 4% rule provides a simple guideline for retirement planning, helping retirees determine a sustainable withdrawal rate that balances income needs with portfolio longevity.

4. Using the Calculator

Tips: Enter your total retirement savings in currency units. The calculator will compute your initial annual withdrawal amount based on the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule still valid today?
A: While debated, the 4% rule remains a popular starting point for retirement planning, though individual circumstances may warrant adjustments.

Q2: Does the 4% rule account for inflation?
A: Yes, the rule typically includes annual inflation adjustments to maintain purchasing power throughout retirement.

Q3: What factors might require adjusting the withdrawal rate?
A: Market conditions, life expectancy, healthcare costs, and other income sources may necessitate adjusting the withdrawal rate.

Q4: How long will my money last with the 4% rule?
A: The rule is designed to make your savings last at least 30 years, based on historical market data.

Q5: Should I use a different percentage?
A: Some experts suggest a more conservative 3-3.5% withdrawal rate for early retirees or during periods of market volatility.