1. What is the Rule of 4?

The Rule of 4 is a retirement planning guideline that suggests withdrawing 4% of your investment portfolio annually. This approach aims to provide sustainable income throughout retirement while preserving the principal investment.

2. How Does the Calculator Work?

The calculator uses the Rule of 4 formula:

Where:

• \( Portfolio \) — Total investment portfolio value ($)
• \( 0.04 \) — 4% withdrawal rate

Explanation: This simple calculation helps retirees determine a sustainable annual withdrawal amount from their investment portfolio.

3. Importance of Rule of 4 Calculation

Details: The 4% rule provides a guideline for sustainable retirement spending, helping retirees balance income needs with portfolio preservation over a 30-year retirement period.

4. Using the Calculator

Tips: Enter your total portfolio value 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. Actual results may vary depending on market conditions, inflation, and individual circumstances.

Q2: Should I adjust the withdrawal rate over time?
A: Many financial advisors recommend adjusting withdrawals annually based on inflation and portfolio performance rather than sticking rigidly to 4%.

Q3: Does this work for all portfolio types?
A: The rule was originally based on a balanced portfolio of stocks and bonds. Different asset allocations may require different withdrawal strategies.

Q4: What about taxes?
A: The calculated withdrawal amount is pre-tax. You'll need to account for taxes on your withdrawals depending on your account types and tax situation.

Q5: Is the 4% rule still relevant today?
A: While debated, the 4% rule remains a useful starting point for retirement planning, though some experts suggest a more conservative approach in today's market environment.