4% is the classic rule; lower is more conservative.
Withdrawals grow each year to keep your spending power.
Annual Income
$0
First year, before inflation
Monthly Income
$0
First year, before inflation
Portfolio Lasts
—
With returns & inflation applied
Portfolio Balance During Retirement
My 4% Rule Plan — Financial Depth
financialdepth.com/4-percent-rule
Quick Summary (TL;DR)
- Annual income = portfolio × withdrawal rate. At 4%, a $1M portfolio = $40,000/year.
- The 4% rule = the flip side of needing 25× your expenses to retire.
- Whether your money lasts depends on real return vs. withdrawal rate — if real returns beat your rate, it can last indefinitely.
- Formula:
Annual = Portfolio × (Rate ÷ 100)
Understanding the 4% Rule
The 4% rule is the most quoted guideline in early retirement. It grew out of financial planner William Bengen's 1994 research and the later Trinity Study, which tested historical U.S. market data and found that withdrawing 4% of a portfolio in the first year — then adjusting that dollar amount for inflation each year after — survived almost every 30-year period without running out of money. Flip the math around and a 4% rate is the same as needing 25 times your annual expenses.
This calculator applies the rule two ways. First it computes your Annual Income = Portfolio × (Withdrawal Rate ÷ 100). Then it simulates retirement year by year: each year it removes your inflation-adjusted withdrawal, grows the remaining balance by your expected return, and repeats — so you can see whether the portfolio holds steady, grows, or slowly depletes.
Worked example: A $1,000,000 portfolio at 4% gives $40,000 in the first year, about $3,333/month. If it earns a 6% return against 3% inflation, the real return comfortably covers the withdrawals and the balance can last well beyond 30 years. Push the rate to 6%, though, and withdrawals begin to outrun growth — the portfolio depletes far sooner. Small changes in the rate have an outsized effect on how long your money lasts.
Frequently Asked Questions
What is the 4% rule?+
It's a retirement guideline: withdraw 4% of your portfolio in year one, then adjust that dollar amount for inflation each year, with a strong historical chance the money lasts at least 30 years. It comes from William Bengen's research and the Trinity Study.
Is the 4% rule still safe today?+
It's a useful starting point, not a guarantee. It was based on historical U.S. data and can be strained by high valuations, low yields, or a poor sequence of returns early on. Many retirees use a slightly lower rate, stay flexible with spending, or revisit the plan regularly.
How long will my money last at a 4% withdrawal rate?+
It depends on your real (after-inflation) return. If real returns at least match your withdrawal rate, the balance can last indefinitely; if withdrawals outpace real growth, it depletes over time. This calculator simulates each year so you can see the crossover.
Key Considerations
- Sequence-of-returns risk is the silent killer. A crash in your first few retirement years forces selling at lows and can permanently impair the portfolio — the single biggest threat to the 4% rule.
- Valuations matter at the start. Retiring when markets are expensive (high CAPE) historically lowers the safe rate; some research (Early Retirement Now) favours 3–3.5% for very long or early retirements.
- Flexibility beats rigidity. "Guardrail" strategies — trimming spending in bad years, spending more in good ones — let many retirees safely start above 4%.
- It’s not set-and-forget. Taxes, healthcare, and inflation shocks all hit real spending; revisit your rate every few years.