4% Rule Calculator
Apply the 4% rule to a portfolio to see your first-year retirement income, or work out the nest egg a target income requires.
How it works
First-year withdrawal = portfolio × rate · Following years = prior withdrawal × (1 + inflation) · Portfolio needed = target income ÷ rate
The 4% rule, from the Trinity study, says you can withdraw 4% of a portfolio in year one and then raise that dollar amount with inflation each year, with a high chance of the money lasting 30 years. It is a planning guideline, not a guarantee: the safe rate depends on your time horizon, asset mix and the returns in your first retirement decade. Many planners now treat 3.5%–4% as the prudent range.
Worked example
A $1,000,000 portfolio at 4% allows a $40,000 withdrawal in year one, about $3,333 a month. If prices rise 3%, year two’s withdrawal becomes $41,200 — the same real spending, more dollars. To instead target $40,000 of income, you would need $40,000 ÷ 0.04 = $1,000,000.
Sources: Trinity study / safe withdrawal rate
Frequently asked questions
Is the 4% rule still safe?
It held up across most historical 30-year periods for a balanced portfolio, but critics note low bond yields and high valuations argue for caution. A longer retirement or an early bad market may call for 3%–3.5%, or for flexible spending that adjusts to returns.
Do I really increase withdrawals every year?
In the classic rule, yes — you set the first year at 4% of the starting balance, then adjust that dollar figure for inflation regardless of market moves. Flexible strategies instead trim withdrawals after down years to improve longevity.
What portfolio does the rule assume?
The original studies used a mix of roughly 50%–75% stocks with the rest in bonds. Too little in stocks risks inflation eroding the portfolio; too much raises the chance of a damaging early crash.
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Educational estimate, not financial or tax advice. Rules and limits change — confirm current figures with a qualified advisor.