1. What is the 4% Rule?

The 4% rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their 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 equation:

Where:

• \( W \) — Annual withdrawal amount (dollars/year)
• \( S \) — Total savings amount (dollars)

Explanation: This simple calculation helps determine a sustainable annual withdrawal rate from retirement savings based on the 4% rule principle.

3. Importance of the 4% Rule

Details: The 4% rule provides a conservative guideline for retirement planning, helping individuals estimate how much they can safely withdraw from their savings each year while maintaining their principal balance over the long term.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule guaranteed to work?
A: The 4% rule is a guideline based on historical market data and may not work in all economic conditions. It's important to review your withdrawal strategy regularly.

Q2: Should the withdrawal amount be adjusted for inflation?
A: Yes, the original 4% rule suggests increasing the withdrawal amount annually to account for inflation.

Q3: Does this rule 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 savings last.

Q4: What investment allocation is assumed?
A: The 4% rule typically assumes a balanced portfolio of 50-75% stocks and 25-50% bonds.

Q5: Are there limitations to this rule?
A: The rule doesn't account for taxes, changing market conditions, or individual spending patterns and should be used as a starting point rather than a definitive plan.