1. What is the 4% Rule?

The 4% rule is a retirement withdrawal strategy that suggests retirees can safely withdraw 4% of their retirement savings 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 4% rule formula:

Where:

• \( \text{Retirement Savings} \) — Total retirement portfolio value
• \( 0.04 \) — Safe withdrawal rate (4%)
• \( \text{Annual Withdrawal} \) — Safe annual withdrawal amount

Explanation: This rule is based on historical market data showing that a 4% withdrawal rate has a high probability of sustaining a retirement portfolio for 30 years.

3. Importance of Safe Withdrawal Strategy

Details: Proper withdrawal planning is crucial for retirement security, ensuring that retirees don't outlive their savings while maintaining their desired lifestyle.

4. Using the Calculator

Tips: Enter your total retirement savings in your local currency. The calculator will compute your safe annual withdrawal amount based on the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule still valid today?
A: While debated, the 4% rule remains a popular benchmark, though some experts suggest adjusting based on current market conditions and individual circumstances.

Q2: Does the 4% rule account for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments to maintain purchasing power.

Q3: What factors might require adjusting the withdrawal rate?
A: Market volatility, longer life expectancy, healthcare costs, and personal risk tolerance may warrant adjustments to the withdrawal rate.

Q4: How does asset allocation affect the 4% rule?
A: The rule was originally based on a 50-60% stock portfolio. More conservative allocations may require lower withdrawal rates.

Q5: Should I use the 4% rule for early retirement?
A: For retirements longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate to ensure portfolio longevity.