Your FIRE Projections
First Year Annual Withdrawal:
$0.00
Monthly Budget:
$0.00
Note: These figures represent your purchasing power in Year 1. Subsequent years should be adjusted for inflation.
Understanding Safe Withdrawal Rate (SWR) in FIRE
The Safe Withdrawal Rate (SWR) is a critical metric for anyone pursuing Financial Independence, Retire Early (FIRE). It represents the maximum percentage of your total investment portfolio that you can withdraw annually without depleting your funds over a specific timeframe, typically 30 years.
The Famous 4% Rule
Originating from the Trinity Study, the 4% rule suggests that a retiree can withdraw 4% of their initial portfolio balance in the first year and adjust that amount for inflation every year thereafter. Historically, this strategy resulted in a portfolio lasting at least 30 years across most market conditions.
Key Factors Influencing Your SWR
- Asset Allocation: A mix of low-cost index funds (stocks) and bonds significantly impacts the portfolio's volatility and growth potential.
- Sequence of Returns Risk: Experiencing a market crash in the first few years of retirement is more dangerous than a crash occurring 20 years later.
- Inflation: If inflation rises faster than your portfolio growth, your purchasing power diminishes, requiring a more conservative SWR.
- Retirement Duration: For early retirees looking at a 50+ year horizon, many experts recommend a lower SWR, such as 3% or 3.25%.
Example Calculation
If you have a $1,200,000 portfolio and choose a 3.5% withdrawal rate:
Year 1 Withdrawal: $1,200,000 * 0.035 = $42,000 / year
Monthly Budget: $42,000 / 12 = $3,500 / month
In Year 2, if inflation was 3%, you would increase your $42,000 withdrawal by 3% ($43,260) regardless of how the stock market performed.
function calculateSWR() {
var portfolio = parseFloat(document.getElementById('portfolioSize').value);
var rate = parseFloat(document.getElementById('withdrawalRate').value);
var returns = parseFloat(document.getElementById('expectedReturn').value);
var inflation = parseFloat(document.getElementById('inflation').value);
if (isNaN(portfolio) || isNaN(rate) || portfolio <= 0 || rate <= 0) {
alert("Please enter valid numbers for Portfolio Balance and Withdrawal Rate.");
return;
}
var annual = portfolio * (rate / 100);
var monthly = annual / 12;
// Simple sustainability check (Real Return = Nominal – Inflation)
var realReturn = returns – inflation;
var resultsDiv = document.getElementById('resultsArea');
var messageBox = document.getElementById('longevityMessage');
document.getElementById('annualIncome').innerText = '$' + annual.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('monthlyIncome').innerText = '$' + monthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultsDiv.style.display = 'block';
if (rate <= realReturn) {
messageBox.style.backgroundColor = '#d4edda';
messageBox.style.color = '#155724';
messageBox.innerText = "Highly Sustainable: Your withdrawal rate is lower than or equal to expected real returns. Your portfolio is likely to grow indefinitely.";
} else if (rate <= realReturn + 2) {
messageBox.style.backgroundColor = '#fff3cd';
messageBox.style.color = '#856404';
messageBox.innerText = "Moderate Risk: You are dipping into your principal. This is standard for a 30-year retirement, but monitor your balance closely.";
} else {
messageBox.style.backgroundColor = '#f8d7da';
messageBox.style.color = '#721c24';
messageBox.innerText = "High Risk: Your withdrawal rate is significantly higher than real returns. There is a strong chance of depleting funds in a long-term retirement.";
}
resultsDiv.scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}