1. What is the 4% Rule?

The 4% rule is a retirement withdrawal strategy that suggests retirees can safely withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, with a high probability the funds will last 30 years.

2. How Does the Calculator Work?

The calculator uses the 4% rule formula:

Where:

• Initial Balance — Total retirement savings at the start of retirement
• 0.04 — The 4% withdrawal rate (4% = 0.04 in decimal form)

Explanation: The calculation provides a sustainable annual withdrawal amount that aims to make retirement savings last for 30 years.

3. Importance of the 4% Rule

Details: The 4% rule helps retirees determine a safe withdrawal rate that balances current spending needs with long-term portfolio sustainability, based on historical market returns.

4. Using the Calculator

Tips: Enter your total retirement savings balance in dollars. The calculator will show your recommended annual and monthly withdrawal amounts.

5. Frequently Asked Questions (FAQ)

Q1: Where does the 4% rule come from?
A: It originated from the 1994 Trinity Study which analyzed historical market data to determine sustainable withdrawal rates.

Q2: Is the 4% rule guaranteed to work?
A: No, it's based on historical data and doesn't guarantee future results. Market conditions and personal circumstances may require adjustment.

Q3: Should I adjust for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments after the first year.

Q4: Does the 4% rule work for early retirement?
A: For retirements longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate.

Q5: What asset allocation does this assume?
A: The original study assumed a 50-75% stock allocation. Different allocations may affect sustainability.