1. What is the 4% Withdrawal Rule?

The 4% withdrawal rule is a retirement planning guideline that suggests retirees can withdraw 4% of their portfolio balance annually, adjusted for inflation, with a high probability of not outliving their savings over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the 4% rule formula:

Where:

• \( \text{Balance} \) — Total retirement savings in dollars
• \( 0.04 \) — 4% withdrawal rate

Explanation: The calculation provides a safe initial withdrawal amount that can be adjusted annually for inflation.

3. Importance of the 4% Rule

Details: This rule helps retirees determine a sustainable spending rate that balances current needs with the longevity of their retirement savings.

4. Using the Calculator

Tips: Enter your total retirement savings balance in dollars. The calculator will show your recommended initial annual withdrawal amount.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule guaranteed to work?
A: No, it's based on historical market performance and may need adjustment based on future market conditions and individual circumstances.

Q2: Should I withdraw exactly 4% every year?
A: The 4% is just the initial withdrawal rate - you would typically adjust this amount annually for inflation.

Q3: Does this account for taxes?
A: No, the withdrawal amount is pre-tax. You'll need to account for taxes separately.

Q4: What if my retirement lasts longer than 30 years?
A: You might consider a more conservative withdrawal rate (e.g., 3-3.5%) for longer retirement periods.

Q5: Does this work for all asset allocations?
A: The original study assumed a 50-75% stock allocation. More conservative portfolios might require lower withdrawal rates.