1. What is the Four Percent Rule?

The Four Percent Rule is a retirement planning guideline 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:

• \( Portfolio \) — Total retirement portfolio value
• \( 0.04 \) — Four percent withdrawal rate (4%)

Explanation: This rule is based on historical market data showing that a 4% withdrawal rate has high probability of sustaining a retirement portfolio for 30 years across various market conditions.

3. Importance of Safe Withdrawal Rate

Details: Determining a safe withdrawal rate is crucial for retirement planning to ensure your savings last throughout retirement while maintaining your desired lifestyle.

4. Using the Calculator

Tips: Enter your total retirement portfolio value in your local currency. The calculator will compute the 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 a guideline based on historical data. Actual results may vary depending on market performance, inflation, and individual circumstances.

Q2: Should I adjust for inflation each year?
A: Yes, the traditional 4% rule includes annual inflation adjustments 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.

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 not account for sequence of returns risk, changing market conditions, or individual spending patterns.