How to use the 4% rule
Turn a portfolio into a starting income estimate.
1
Enter the portfolio
Use investable assets, not the value of your home.
2
Choose a rate
Test 3.5%, 4% and 4.5% to see the range.
3
Stress-test
Model a market fall in the early years and a longer retirement.
What does this tool do?
The 4% rule is a planning heuristic: withdraw about 4% of a diversified portfolio in the first year, then adjust for inflation. It is not a guarantee, and it was derived from historical US data. Use it as a starting point for scenario testing.
The Formula
Annual withdrawal = Portfolio × Withdrawal rateFrequently Asked Questions
Is the 4% rule still safe?
It is a planning heuristic, not a guarantee. Lower expected returns or a long retirement may call for a lower initial rate or a flexible spending plan.
Does the rule include taxes and fees?
Usually not explicitly. Treat the withdrawal as gross spending and account for taxes, fund fees and advisory fees separately.