4% Rule (Safe Withdrawal) Calculator
Enter how much you plan to spend each year in retirement to get the nest egg you need under the "4% rule". Add your current portfolio to see how far along you are and the safe income your portfolio could support today. The calculator also shows your shortfall and how close you are to the 25x target.
How it works
Where the 4% rule comes from
The 4% rule traces back to financial planner William Bengen in 1994 and to the Trinity Study (Cooley, Hubbard and Walz, 1998). Both analysed US historical stock and bond returns and asked how much a retiree could withdraw each year without running out of money over a roughly 30-year retirement.
How to read your number
Your target nest egg equals annual spending divided by the withdrawal rate. At 4%, that works out to 25 times your yearly spending, because 100% divided by 4% is 25. Spend $40,000 a year and the rule points to about $1,000,000. The idea is to withdraw 4% in year one, then adjust that dollar amount for inflation each year.
Key caveats
- Sequence-of-returns risk: a steep market drop in the first years can do lasting damage, even if average returns later recover.
- It is a planning guideline, not a guarantee. The figures rest on past US data, which may not repeat.
- Low-return environments or longer horizons can make a more conservative rate sensible.
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Frequently Asked Questions
What is the 4% rule?
A planning rule of thumb: withdraw 4% of your portfolio in the first year of retirement, then adjust that amount for inflation each year. Based on US historical data, a portfolio holding a meaningful share of stocks had a high chance of lasting about 30 years.
Why is the target 25× annual spending?
Because 25 is 100% divided by 4%, the reciprocal of the withdrawal rate. Lowering the rate to 3% requires about 33×; raising it to 5% requires 20×.
Is the 4% rule still safe today?
It remains a useful starting point, but it is not a guarantee. It was derived from past US returns; high valuations, low bond yields, or higher inflation can argue for a more cautious rate or flexible spending.
Does the rule already include inflation adjustments?
Yes. The original studies assume you raise your withdrawal each year by inflation, so your spending power stays roughly constant. The 4% applies to the first year; later withdrawals are that amount grown by inflation, not a fresh 4% of the balance.
What about a 40 to 50 year early-retirement horizon?
The 4% rule was tested mainly on 30-year retirements. For a much longer horizon, many planners lean toward roughly 3% to 3.5%, or a flexible approach that trims spending after weak market years.
4% or 3.5% — which should I use?
A lower rate like 3.5% builds in a bigger safety margin and suits long retirements or cautious savers, but it requires a larger nest egg (about 28.5×). 4% needs less (25×) but leaves a thinner cushion. Try both in the calculator above.
This calculator is an educational estimate, not individual financial advice. The 4% rule is a historical rule of thumb and does not guarantee future results. Taxes and fees are not included.