1. What Is The 4% Rule?

The 4% Rule is a retirement planning guideline that suggests you can safely withdraw 4% of your initial portfolio value 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 4% Rule formula:

Where:

• \( Portfolio \) — Total investment portfolio value
• \( 0.04 \) — The 4% withdrawal rate (4% = 0.04)
• \( Safe\ Withdrawal \) — Annual withdrawal amount

Explanation: This calculation determines the annual amount you can withdraw from your portfolio while maintaining a high probability of your funds lasting 30 years.

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 portfolio value in your preferred currency. The calculator will compute your safe annual withdrawal amount based on the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Where did the 4% rule come from?
A: The 4% rule 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 provides a high probability of success, but not a guarantee. Market conditions and individual circumstances may vary.

Q3: Should I adjust for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments to maintain purchasing power throughout retirement.

Q4: 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 funds last.

Q5: What portfolio composition is assumed?
A: The original study assumed a 50-60% stock and 40-50% bond portfolio. Different asset allocations may affect sustainable withdrawal rates.