The 4% Rule, Explained
The 4% rule is a simple way to translate a pot of savings into sustainable annual income — and to work out how big that pot needs to be.
Where the number comes from
Research into historical market returns suggested that withdrawing about 4% of a portfolio in the first year of retirement — then adjusting for inflation each year — gave a strong chance of the money lasting 30 years.
Flip it around and your target is 25× your annual spending: spend $40,000 a year, aim for roughly $1,000,000.
Its limits
It's a guideline, not a guarantee. Very long retirements (40+ years), poor early returns, or high fees can strain it, which is why some planners prefer a more conservative 3–3.5%. Flexibility in your spending is the best safety margin.
Related calculators
FIRE Calculator
Financial Independence, Retire Early. We'll find your 'FIRE number' from your spending using the 4% rule, then estimate how long it takes to reach it.
Retirement Calculator
Project your nest egg to retirement age, including any employer match, and see the annual income it could safely provide.
Retirement Withdrawal Calculator
See how long a nest egg lasts at a chosen annual withdrawal, with returns still working and withdrawals rising for inflation. Also known as a drawdown or distribution calculator.