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 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 in dollars
• \( 0.04 \) — The 4% withdrawal rate (4% expressed as decimal)

Explanation: This simple calculation provides the annual withdrawal amount that should theoretically sustain a retirement portfolio for 30 years.

3. Importance of the 4% Rule

Details: The 4% rule provides a conservative starting point for retirement planning, helping retirees balance their need for income with portfolio sustainability over the long term.

4. Using the Calculator

Tips: Enter your total portfolio value in dollars. The calculator will compute the 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 results.

Q2: Should the withdrawal amount be adjusted for inflation?
A: Yes, the original 4% rule study assumed annual inflation adjustments to maintain purchasing power.

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.

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 doesn't account for taxes, changing spending patterns, or unexpected expenses, and may need adjustment based on individual circumstances.