1. What is the Rule of 4 for Retirement?

The Rule of 4, also known as the 4% rule, is a retirement planning guideline that suggests retirees can safely withdraw 4% of their portfolio annually without running out of money over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the Rule of 4 formula:

Where:

• \( Portfolio \) — Total retirement portfolio value in dollars
• \( 0.04 \) — The 4% withdrawal rate

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

3. Importance of the 4% Rule

Details: The 4% rule provides a conservative guideline for retirement spending that aims to balance current lifestyle needs with long-term financial security, helping prevent retirees from outliving their savings.

4. Using the Calculator

Tips: Enter your total retirement 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 still valid today?
A: While the 4% rule is a useful starting point, many financial advisors suggest adjusting it based on market conditions, life expectancy, and individual circumstances.

Q2: Should the withdrawal amount be adjusted for inflation?
A: Yes, the original 4% rule study assumed annual inflation adjustments to maintain purchasing power throughout retirement.

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 rates.

Q4: What if I have other income sources?
A: The 4% rule typically applies to your investment portfolio only. Social Security, pensions, or other income should be considered separately.

Q5: How should I modify this rule for early retirement?
A: For retirement periods longer than 30 years, a more conservative withdrawal rate (3-3.5%) may be appropriate to ensure funds last.