Use a complete retirement budget and separate essential costs from flexible spending.
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Set your assumptions
Change a value to explore a scenario.
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4% is the classic rule; lower is more conservative.
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Withdrawals grow each year to keep your spending power.
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Your scenario
Read the result alongside the assumptions.
Annual Income
$0
First year, before inflation
Monthly Income
$0
First year, before inflation
Portfolio Lasts
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With returns & inflation applied
Portfolio Balance During Retirement
How the 4% rule works: a three-year withdrawal example
The classic inflation-adjusted approach sets a dollar withdrawal in year one and then changes that amount with inflation. It does not calculate 4% of the changing portfolio every year. Here is the spending arithmetic for a $1 million starting portfolio and a constant 3% inflation assumption.
| Year | Calculation | Annual gross withdrawal | Monthly equivalent |
|---|---|---|---|
| 1 | $1,000,000 × 4% | $40,000 | $3,333 |
| 2 | $40,000 × 1.03 | $41,200 | $3,433 |
| 3 | $41,200 × 1.03 | $42,436 | $3,536 |
Monthly amounts are rounded. This table calculates withdrawals only; it makes no return assumption and does not prove portfolio survival.
Suppose the portfolio is worth $800,000 at the start of year two. The inflation-adjusted strategy still asks for $41,200, equal to 5.15% of that balance. Taking 4% of the current balance instead gives $32,000. The second approach changes spending with the market; it does not preserve the same purchasing power.
Decide which spending rule you mean before comparing results. This page’s calculator uses inflation-adjusted dollar withdrawals, while its steady annual return cannot reproduce a changing sequence of market gains and losses.
Sources: Bengen: historical withdrawal research. Examples are illustrative calculations, not survey findings.
Apply the 4% rule to the spending gap your portfolio must fund
If your annual cash requirement is $48,000 and reliable spendable outside income is $18,000, the portfolio gap is $30,000. At a 4% starting rate, that gap implies $750,000 of portfolio assets. At 3.5%, it implies about $857,143. These are arithmetic targets, not guarantees of a successful retirement.
| Portfolio | 3% first-year draw | 3.5% first-year draw | 4% first-year draw |
|---|---|---|---|
| $500,000 | $15,000 | $17,500 | $20,000 |
| $700,000 | $21,000 | $24,500 | $28,000 |
| $1,000,000 | $30,000 | $35,000 | $40,000 |
| $1,500,000 | $45,000 | $52,500 | $60,000 |
Annual gross withdrawals before any tax or fees that your budget must cover.
Four checks before using the result
- Subtract outside income only during years when it is actually received.
- Include taxes and irregular expenses in the amount the portfolio must supply.
- Test your own retirement horizon; a 30-year illustration does not settle a 40- or 50-year plan.
- Compare less favorable assumptions and decide how much spending can change after losses.
The retirement bridge tool handles income timing in more detail. For portfolio-specific examples, compare $700k and $1.5 million.
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.
- Longevity depends on the timing of withdrawals, inflation, returns, and horizon. A constant-return simulation is not a guarantee of sustainability.
- 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% provides $40,000 in the first year, about $3,333 per month. With a 6% nominal return and 3% inflation, the real return is approximately 2.91%: 1.06 ÷ 1.03 − 1. That is below a 4% initial draw, so part of spending comes from capital. The calculator shows depletion under its fixed-return assumptions; it does not estimate a probability of success in real markets.
What the research actually says: 2.31% to 6%
There is no single safe withdrawal rate. Every figure below comes from a named study or a research house that publishes its assumptions — and they span nearly a threefold range. On a $1,000,000 portfolio that is the difference between $23,100 and $60,000 of first-year income. The spread is not disagreement about arithmetic; it is disagreement about which history you are allowed to assume repeats.
Note the two entries at 6%: the same rate draws opposite verdicts depending on whether spending is rigid or flexible. That, not arithmetic, is what the argument is really about. Press Apply on any row to load that rate into the calculator above and see it against your own numbers.
| Rate | What it is | What it assumes | |
|---|---|---|---|
| 2.31% | Global historical floor Anarkulova, Cederburg, O’Doherty & Sias (2025) | 38 developed countries, 1890–2019. A 65-year-old couple accepting a 5% chance of ruin. | |
| 3.0% | “Absolutely safe” Bengen (1994) | His own term. Portfolio longevity never below 50 years in any historical period (true up to about 3.5%). | |
| 3.3% | First Morningstar estimate Morningstar (2021) | Balanced portfolio, fixed real withdrawals, 30 years, 90% success. | |
| 3.7% | Morningstar, 2025 retirees Morningstar (2024 edition) | Same method, prior year’s capital market assumptions. | |
| 3.9% | Morningstar, 2026 retirees Morningstar (2025 edition) | 30 years, 30–50% equity, 90% success, excludes Social Security. Raised from 3.7% on improved assumptions. | |
| 4.0% | The original rule Bengen (1994) | Worst historical case still lasted 33 years; most cases 50+. Data through 1992, 50/50 portfolio. | |
| 4.25% | Where the margin thins Bengen (1994) | Could have exhausted a portfolio in as little as 28 years under past conditions. | |
| 5.0% | Bengen: “risky” Bengen (1994) | Retirees starting in the late 1960s / early 1970s might have had only 20 years of funds. | |
| 6.0% | With flexible spending Morningstar (2025 edition) | Morningstar’s wording is “nearly 6%”. Requires genuinely accepting real cuts in spending when markets fall. | |
| 6.0% | Bengen: “gambling” Bengen (1994) | His word. At 6% he counted more historical scenarios that failed than succeeded over 30 years. |
Bengen figures are quoted from the original 1994 Journal of Financial Planning article. Bengen later revised his own number upward — 4.5%, and subsequently 4.7%, after widening the asset mix — figures widely reported from his books and interviews rather than from the 1994 paper, so they are described here rather than tabulated.
Five things the original paper says that most summaries get wrong
The 1994 article is short, readable, and freely available. Reading it dissolves several beliefs that have accreted around it.
“Bengen recommended a 50/50 portfolio”
He used 50/50 to illustrate, then concluded the opposite: advisers should get clients to a stock allocation as close to 75% as possible, and in no case below 50%. He judged allocations under 50% and over 75% both counterproductive.
“The Great Depression was the worst case”
It ranked third. The 1973–74 recession was the most destructive because it came with high inflation. His conclusion: a deflationary crash is not the thing to fear — an inflationary one is, because it erodes purchasing power and portfolio value together.
“You withdraw 4% of the balance every year”
The percentage is used once, in year one. After that the dollar amount moves with inflation only, and is deliberately decoupled from what the portfolio is doing. A 4%-of-current-balance strategy is a different rule with different behaviour.
“4% is a safe round number”
The margin above it is thin. 4% never failed inside 33 years in his data — but 4.25% could have run dry in 28. Meanwhile he called 3% (and up to roughly 3.5%) the “absolutely safe” level, 5% “risky”, and 6% or more “gambling”.
“It is a rule”
The paper is a method, not a constant: pick the shortest portfolio life you can accept — he suggested life expectancy plus five to ten years — then read off the highest rate that survives it. Every input is meant to be replaced with your own. The number that came out for a 60–65-year-old in 1994 was about 4%.
The number is lower outside the United States
Every figure in the 4% lineage rests on twentieth-century American market data. That is a survivorship problem: the US was among the best-performing markets of that century, and a rule calibrated to the winner will flatter every other outcome.
The most direct test of this appeared in the Journal of Pension Economics and Finance in 2025. Using a dataset built to correct for survivor and “easy data” bias across 38 developed countries from 1890 to 2019, Anarkulova, Cederburg, O’Doherty and Sias found that a 65-year-old couple willing to accept a 5% chance of running out could withdraw just 2.31% a year — roughly half the conventional figure. An earlier working-paper version of the same study reported 2.26%; the published, peer-reviewed figure is 2.31%.
Two honest readings coexist. If you are a US retiree with a US-listed portfolio, the American record is arguably the relevant one. If you are retiring elsewhere, or you think the next century is not obliged to repeat the last American one, the global number is the more sober anchor. This calculator lets you hold both: run 3.9% and 2.31% side by side and see what changes.
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 the return path, inflation, spending, and retirement horizon. This calculator applies one fixed annual return and inflation assumption and shows the resulting balance. It does not model market sequences, tax rules, or a probability of success, so a long modeled lifespan is not a guarantee.
Do I withdraw 4% of the original balance or the current balance?
The classic approach uses 4% of the starting portfolio for year one, then adjusts that dollar amount for inflation. Taking 4% of each year’s current balance is a different strategy, with spending that moves with the portfolio.
Does the 4% rule include Social Security?
The rate determines withdrawals from the investment portfolio. Social Security is separate income. Subtract spendable benefits from the budget only once payments begin, then calculate what the portfolio still needs to supply.
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.
Related Tools
FIRE Number Calculator →
Find the portfolio size you need to retire early.
Early Mortgage Payoff →
See the interest and years you save with extra payments.
Retire abroad →Why the rate arguably drops when your spending leaves the dollar.
Sources: William P. Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning 7(4): 171–180 (October 1994) — all Bengen figures and quoted terms on this page are taken from that article. Morningstar, State of Retirement Income (2025 edition, for 2026 retirees). Anarkulova, Cederburg, O’Doherty & Sias, “The safe withdrawal rate: evidence from a broad sample of developed markets,” Journal of Pension Economics and Finance 24(3): 464–500 (2025). Method and limitations: FinancialDepth methodology.
Decision guide
Use the 4% rule as a range, not a promise
A withdrawal rate converts a portfolio into first-year retirement income. The useful question is how results change at 3%, 3.5%, 4%, and 5% for your horizon, allocation, flexibility, and other income.
A lower rate supports a longer horizon but requires a larger portfolio or lower spending.
Social Security, pensions, and part-time work reduce what the portfolio must fund.
What this model includes
- First-year withdrawal income
- Portfolio longevity under selected assumptions
What to add outside the model
- Taxes, required distributions, and claiming choices
- Real sequence-of-returns variation unless explicitly modeled
Calculation standard: Formula details, source policy, tests, and limitations are documented in the FinancialDepth methodology. Reviewed July 18, 2026.