RetireWise

The 4% rule, with a calculator

Withdraw 4% of your savings in year one, then raise that amount with inflation. Here's the number it implies for you, and how far to trust it.

$
$
Per year
%

You need about

$650,000

to draw $26,000 a year at 4% (25.0× your gap).

Monthly from savings
$2,167
Lasts at 5% return
38 yrs

How long savings last at each withdrawal rate

RateSavings needed per $1 of yearly gapLasts at 5% returnLasts at 6% return
3%33.3×60+ years60+ years
3.5%28.6×48 years60+ years
4%25.0×38 years52 years
4.5%22.2×32 years40 years
5%20.0×27 years33 years

Steady returns, withdrawals rising 2.5% a year. Real markets vary; see the Monte Carlo calculator.

Where the 4% rule comes from

Financial planner William Bengen published "Determining Withdrawal Rates Using Historical Data" in 1994. He tested every 30-year retirement starting from 1926 and found that a first-year withdrawal of about 4%, adjusted for inflation, never ran out for a portfolio holding 50–75% stocks. Three Trinity University professors confirmed it in 1998 with different assumptions.

Where it falls short

  • Longer retirements. Early retirees funding 40–50 years usually start at 3.25–3.5%.
  • Rigid spending. Real retirees adjust; flexible "guardrail" rules let you start higher.
  • Fees and taxes. A 1% advisory fee eats a quarter of a 4% withdrawal.

Test your own plan with the withdrawal calculator, or see how long a specific balance lasts, such as $1 million or $500,000.

Questions people ask

What is the 4% rule?

In the first year of retirement, withdraw 4% of your portfolio; every year after, withdraw the same dollar amount raised by inflation. William Bengen (1994) found that this survived every 30-year period in US market history he tested with a 50–75% stock portfolio. The 1998 Trinity study reached a similar conclusion.

How much do I need to retire using the 4% rule?

Multiply the yearly spending your savings must cover by 25. If you need $40,000 a year beyond Social Security, you need $1 million. At 3.5% the multiple is about 28.6.

Is the 4% rule still valid?

It is a reasonable starting point for a 30-year retirement, not a guarantee. Morningstar's annual safe withdrawal research has put the safe starting rate between roughly 3.3% and 4% in recent years, depending on bond yields and valuations. Longer retirements and rigid spending call for a lower rate; willingness to cut spending after bad years allows a higher one.

What is the 7% withdrawal rule?

There is no widely accepted "7% rule" for withdrawals. Taking 7% a year, raised with inflation, has historically depleted portfolios in well under 30 years in many periods: at a steady 5% return it lasts about 18 years. A 7% figure sometimes refers to an assumed average stock return, which is a different thing.

Does the 4% rule include taxes?

No. The 4% is the gross withdrawal. Tax on Traditional account withdrawals comes out of it, so include taxes in your spending figure, or hold more in Roth accounts.