1. What is the 4 Percent Rule?

The 4 Percent Rule is a retirement planning guideline that suggests retirees can safely withdraw 4% of their portfolio balance annually without running out of money over a 30-year retirement period.

2. How Does the Calculator Work?

The calculator uses the 4 Percent Rule equation:

Where:

• \( Balance \) — Total portfolio balance (currency)
• \( 0.04 \) — 4% withdrawal rate

Explanation: The rule assumes a balanced investment portfolio and adjusts for inflation over time to maintain purchasing power throughout retirement.

3. Importance of the 4 Percent Rule

Details: This rule provides a sustainable withdrawal strategy that helps retirees balance their need for income with the preservation of their retirement savings over the long term.

4. Using the Calculator

Tips: Enter your total portfolio balance in currency units. The calculator will compute the recommended annual withdrawal amount based on the 4% rule.

5. Frequently Asked Questions (FAQ)

Q1: Is the 4 Percent Rule still valid today?
A: While the rule is a useful starting point, many financial advisors suggest adjusting the percentage based on current market conditions, life expectancy, and individual circumstances.

Q2: Does the rule account for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments to maintain purchasing power throughout retirement.

Q3: What investment portfolio does this assume?
A: The rule was originally based on a portfolio of 50% stocks and 50% bonds, but can be adapted to different asset allocations.

Q4: How long will my money last with this rule?
A: The 4% rule was designed to provide a high probability of not running out of money over a 30-year retirement period.

Q5: Should I adjust my withdrawal rate over time?
A: Many financial planners recommend flexible withdrawal strategies that can be adjusted based on market performance and changing personal circumstances.