1. What Is The 4% Rule?

The 4% rule is a retirement withdrawal strategy that suggests retirees can safely withdraw 4% of their portfolio in the first year of retirement, adjusting for inflation each subsequent year, without running out of money for at least 30 years.

2. How Does The Calculator Work?

The calculator uses the 4% rule formula:

With optional adjustments:

• Custom withdrawal rate (default is 4%)
• Spouse adjustment (20% increase for couples)

Explanation: The 4% rule is based on historical market data showing that this withdrawal rate has a high probability of sustaining retirement funds over a 30-year period.

3. Importance Of Retirement Withdrawal Planning

Details: Proper withdrawal planning is essential for retirement security. The 4% rule provides a conservative starting point for determining sustainable retirement income from investment portfolios.

4. Using The Calculator

Tips: Enter your total portfolio value, adjust the withdrawal rate if desired (typically 3-5%), and select whether you're planning for a single retiree or couple. All values must be valid (portfolio > 0, withdrawal rate between 0-100%).

5. Frequently Asked Questions (FAQ)

Q1: Is the 4% rule still valid today?
A: While debated, the 4% rule remains a popular benchmark. Some experts suggest a more conservative 3-3.5% withdrawal rate in today's low-interest environment.

Q2: Why is there a spouse adjustment?
A: Couples typically have longer joint life expectancies and may need slightly higher withdrawals to support two people, hence the 20% adjustment factor.

Q3: Does the 4% rule account for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments after the first year of retirement.

Q4: What types of portfolios work best with the 4% rule?
A: The rule was originally based on a balanced portfolio of 50-75% stocks and 25-50% bonds.

Q5: Are there limitations to the 4% rule?
A: The rule doesn't account for taxes, irregular spending patterns, or significant market downturns early in retirement.