Plan your financial independence with our Retirement 4% Rule Calculator. This tool helps you determine how much you can safely withdraw from your portfolio annually based on the famous Trinity Study.
Retirement 4% Rule Calculator
Retirement 4% Rule Formula
Annual Withdrawal = Portfolio Balance × Withdrawal Rate
Portfolio Needed = Annual Spending / Withdrawal Rate
Source: Investopedia, Bogleheads Wiki
Variables:
- Portfolio Balance: The total value of your retirement savings (stocks, bonds, cash).
- Withdrawal Rate: The percentage of your portfolio you withdraw in the first year of retirement.
- Annual Withdrawal: The actual dollar amount you take out for living expenses.
- Retirement Duration: The number of years you need your money to last (Standard is 30 years).
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- Roth IRA Withdrawal Estimator
What is the Retirement 4% Rule Calculator?
The Retirement 4% Rule is a rule of thumb used to determine how much money a retiree can withdraw from their retirement accounts each year without running out of money. It originated from the “Trinity Study,” which analyzed historical market data to find a “safe withdrawal rate.”
By using this retirement 4% rule calculator, you can estimate your “FIRE number” (Financial Independence, Retire Early) or see if your current savings support your desired lifestyle. It provides a baseline for long-term financial security planning.
How to Calculate Retirement 4% Rule (Example)
- Determine your total retirement savings (e.g., $1,200,000).
- Decide on your safe withdrawal rate (The 4% rule suggests 0.04).
- Multiply the balance by the rate: $1,200,000 × 0.04 = $48,000.
- Adjust the withdrawal amount annually for inflation in subsequent years.
Frequently Asked Questions (FAQ)
Is the 4% rule still valid today? While criticized for being too aggressive in low-yield environments, many experts still use it as a starting point, adjusting for individual risk tolerance.
Does the 4% rule include taxes? No, the withdrawal amount usually represents the gross amount. You must account for income taxes separately based on your account types.
What if I want my money to last more than 30 years? For early retirees (40+ year horizon), experts often recommend a lower withdrawal rate, such as 3% or 3.25%.
Does the rule account for market crashes? Yes, the original Trinity Study tested the rule against periods that included major market downturns like the Great Depression.