1. What is the 4% Rule?

The 4% rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their portfolio annually, adjusted for inflation, without running out of money over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the simple 4% rule formula:

Where:

• \( Portfolio \) — Total retirement portfolio value in dollars
• \( 0.04 \) — The 4% withdrawal rate (4/100 = 0.04)

Explanation: This calculation provides the initial annual withdrawal amount that can be adjusted for inflation in subsequent years.

3. Importance of the 4% Rule

Details: The 4% rule helps retirees determine a sustainable withdrawal rate from their retirement savings, balancing the need for income with the risk of outliving their money.

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: The 4% rule is based on historical market data and is not a guarantee. Market conditions, inflation, and individual circumstances can affect its success.

Q2: Should I adjust the withdrawal amount for inflation?
A: Yes, the original 4% rule study assumed annual inflation adjustments to the withdrawal amount.

Q3: Does the 4% rule 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 composition does the 4% rule assume?
A: The original study assumed a portfolio of 50-75% stocks with the remainder in bonds.

Q5: Are there limitations to the 4% rule?
A: The rule may not account for unexpected expenses, changing market conditions, or individual risk tolerance. It's a guideline, not a guarantee.