1. What is the 4% Retirement Withdrawal Rule?

The 4% rule is a retirement withdrawal strategy that suggests you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, with a high probability of your savings lasting 30 years.

2. How Does the Calculator Work?

The calculator uses the 4% rule formula:

Where:

• \( Portfolio \) — Total retirement portfolio value in dollars
• \( 25 \) — The inverse of 4% (100 ÷ 4 = 25)

Explanation: Dividing your portfolio by 25 gives you the annual withdrawal amount that represents 4% of your total savings.

3. Importance of Safe Withdrawal Rate

Details: The 4% rule helps retirees balance their need for income with the risk of outliving their savings. It's based on historical market data and aims to provide sustainable income throughout retirement.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in dollars. The calculator will compute your safe annual withdrawal amount based on the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule guaranteed to work?
A: No, it's based on historical data and assumes a 30-year retirement. Market conditions, inflation, and individual circumstances can affect outcomes.

Q2: Should I adjust withdrawals for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments to maintain purchasing power.

Q3: What if I have a longer retirement horizon?
A: For retirements longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate.

Q4: Does this work for all portfolio types?
A: The rule was designed for a balanced portfolio (50-75% stocks). More conservative or aggressive allocations may require adjustment.

Q5: Can I withdraw more than 4%?
A: Higher withdrawal rates increase the risk of depleting your portfolio prematurely, especially in market downturns.