1. What is the Four Percent Rule?

The Four Percent Rule is a retirement spending strategy that suggests retirees can safely withdraw 4% of their initial retirement portfolio each year, adjusted for inflation, without running out of money over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the Four Percent Rule formula:

Where:

• \( Withdrawal \) — Annual safe withdrawal amount (currency/year)
• \( Portfolio \) — Initial retirement savings (currency)
• \( 0.04 \) — Four percent withdrawal rate

Explanation: This rule is based on historical market data and aims to provide a sustainable withdrawal rate that balances income needs with portfolio longevity.

3. Importance of Safe Withdrawal Rate

Details: Determining an appropriate withdrawal rate is crucial for retirement planning to ensure that savings last throughout retirement while providing adequate income for living expenses.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule guaranteed to work?
A: The 4% rule is based on historical market performance and has a high success rate over 30-year periods, but it's not guaranteed. Market conditions and individual circumstances may vary.

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

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 portfolio longevity.

Q4: What portfolio allocation is assumed?
A: The original study assumed a 50-60% stock and 40-50% bond portfolio allocation.

Q5: Are there limitations to this rule?
A: The rule may need adjustment for changing market conditions, individual risk tolerance, healthcare costs, and other personal factors.