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4% Rule Equation:
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The 4% Rule is a retirement withdrawal strategy that suggests you can safely withdraw 4% of your initial retirement portfolio each year, adjusted for inflation, without running out of money for at least 30 years. This rule is applicable globally including Indonesia.
The calculator uses the 4% Rule equation:
Where:
Explanation: The 4% rule is based on historical market data and assumes a balanced portfolio of stocks and bonds that can sustain withdrawals over a 30-year retirement period.
Details: The 4% rule provides a systematic approach to retirement withdrawals, helping retirees balance their need for income with the preservation of their retirement savings throughout their lifetime.
Tips: Enter your total retirement portfolio value in Indonesian Rupiah (IDR). The calculator will compute your safe annual withdrawal amount based on the 4% rule.
Q1: Is the 4% rule guaranteed to work?
A: While historically successful in most market conditions, the 4% rule is not guaranteed. Market conditions, inflation, and individual circumstances can affect its success.
Q2: Should I adjust for inflation each year?
A: Yes, the original 4% rule includes annual inflation adjustments to maintain purchasing power throughout retirement.
Q3: 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 longer.
Q4: How does this apply to Indonesian investors?
A: The principle applies globally, but Indonesian investors should consider local inflation rates, investment options, and currency stability when implementing this strategy.
Q5: What portfolio allocation is assumed?
A: The original study assumed a 50-60% stock and 40-50% bond allocation. Your actual allocation should match your risk tolerance.