Home
Back
Withdrawal Formula:
| From: | To: |
The 4% withdrawal rule is a retirement planning guideline that suggests withdrawing 4% of your retirement savings in the first year of retirement, with subsequent withdrawals adjusted for inflation. This strategy aims to provide a sustainable income stream throughout retirement.
The calculator uses the 4% rule formula:
Where:
Explanation: This calculation provides the initial safe withdrawal amount from your retirement portfolio, designed to last throughout a 30-year retirement period when adjusted annually for inflation.
Details: Proper withdrawal planning is essential for retirement security. The 4% rule helps prevent premature depletion of retirement funds while providing a consistent income stream throughout retirement years.
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 not a guarantee. Market conditions, inflation rates, and individual circumstances can affect its success.
Q2: Should I adjust withdrawals for inflation?
A: Yes, the rule typically assumes you'll adjust your withdrawal amount annually for inflation to maintain purchasing power.
Q3: Does this work for early retirement?
A: For retirement periods longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate to ensure funds last.
Q4: What investment return does this assume?
A: The rule historically assumed a portfolio of 50-75% stocks and 25-50% bonds with average annual returns of about 7-8%.
Q5: Are there alternatives to the 4% rule?
A: Yes, alternatives include dynamic withdrawal strategies, bucket approaches, or using annuities to guarantee income.