1. What is the 4 Percent Rule?

The 4% Rule is a retirement planning guideline that suggests you can safely withdraw 4% of your investment portfolio annually without running out of money over a 30-year retirement period. This rule was developed based on historical market data and portfolio longevity studies.

2. How Does the Calculator Work?

The calculator uses the simple 4% Rule formula:

Where:

• \( \text{Portfolio Value} \) — Total value of your investment portfolio in USD
• \( 0.04 \) — The 4% withdrawal rate (4 ÷ 100 = 0.04)

Explanation: This calculation provides your safe annual withdrawal amount based on the 4% rule principle.

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 preservation of capital over the long term.

4. Using the Calculator

Tips: Enter your total portfolio value in USD. The calculator will compute your safe annual withdrawal amount according to the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% Rule guaranteed to work?
A: The 4% Rule is based on historical data and assumes a balanced portfolio. It's not guaranteed but has shown high success rates in past market conditions.

Q2: Should I adjust for inflation?
A: Yes, the traditional 4% Rule includes annual inflation adjustments to maintain purchasing power.

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.

Q4: What type of portfolio does this assume?
A: The rule was developed assuming a 50-75% stock allocation with the remainder in bonds.

Q5: Are there limitations to the 4% Rule?
A: Yes, it may not account for sequence of returns risk, changing market conditions, or individual spending patterns.