Retirement Withdrawal (4% Rule) Calculator

What is the 4% Rule?

The "4% Rule" is a widely cited guideline for retirees, suggesting how much money they can withdraw from their investment portfolio each year without running out of money. It originated from a 1994 study by William Bengen, which was later popularized by the "Trinity Study."

The rule states that you can withdraw 4% of your portfolio's value in your first year of retirement. In subsequent years, you adjust this initial dollar amount (not 4% of the new balance) for inflation. Following this guideline gave a high probability of success (not running out of money) over a 30-year retirement period in historical market scenarios. If you're aiming for early retirement, check out our FIRE Calculator.

How This Calculator Works

This calculator performs the first and simplest step of the 4% Rule: it calculates what your first-year withdrawal amount would be based on your total nest egg and a specific withdrawal rate.

• Retirement Nest Egg: This is the total value of your investment portfolio (stocks, bonds, mutual funds) that you plan to live on. Estimate your future balance with our Retirement Savings Calculator.
• Withdrawal Rate: This is the percentage you plan to take out in the first year. While 4% is the famous guideline, you can adjust this up or down. A lower rate (e.g., 3.5%) is more conservative, while a higher rate (e.g., 4.5%) is more aggressive and carries more risk.

Important Limitations

The 4% Rule is a guideline, not an ironclad law. It's essential to understand its limitations:

1. It's based on historical data. Future market returns are not guaranteed to look like the past.
2. It assumes a specific portfolio. The original studies often assumed a portfolio of 50-75% stocks and the rest in bonds.
3. It doesn't account for flexibility. In a real-world scenario, you might withdraw less in a "down" market year and more in an "up" year. This calculator doesn't model that.

This tool is best used as a starting point to get a "ballpark" figure for your potential retirement income. You should always pair this information with a more detailed financial plan and consider consulting a financial advisor.