Retirement Calculator
How Much Can You Safely Withdraw?
How the 4% Rule Works
The 4% rule is one of the most widely used retirement planning guidelines. The concept is simple: in your first year of retirement, withdraw 4% of your total portfolio value. In each subsequent year, adjust that amount for inflation. Based on historical data going back to 1926, this approach has a roughly 95% success rate over 30-year periods.
For example, with a $1,000,000 portfolio, you'd withdraw $40,000 in the first year ($3,333/month). If inflation is 3% that year, you'd withdraw $41,200 the following year. The remaining portfolio continues to grow through market returns, ideally outpacing your withdrawals.
The Formula
Monthly Income = Annual Income ÷ 12
Retirement Planning Tips
- Start with the "multiply by 25" rule — To find your target retirement number, multiply your desired annual spending by 25. Want $60,000/year? You need $1.5 million.
- Maximize tax-advantaged accounts — Max out your 401(k) ($23,500/year in 2025), then your Roth IRA ($7,000/year). The tax savings compound dramatically over decades.
- Keep fees under 0.20% — High fund fees silently erode your returns. A 1% fee vs. 0.05% fee on a $500,000 portfolio costs you over $200,000 in lost returns over 30 years.
- Consider the "bucket" strategy — Keep 1-2 years of expenses in cash, 3-5 years in bonds, and the rest in stocks. This prevents selling stocks during market downturns.
- Factor in Social Security — Social Security replaces roughly 40% of pre-retirement income for average earners. Delaying benefits to age 70 increases your monthly check by about 77% compared to claiming at 62.
Frequently Asked Questions
What is the 4% rule?
The 4% rule is a guideline that says you can withdraw 4% of your retirement portfolio in the first year, then adjust for inflation each year, and have a high probability (historically ~95%) of not running out of money over 30 years. It was developed by financial advisor William Bengen in 1994 based on historical stock and bond returns.
How much do I need to retire?
A common target is 25 times your annual expenses. If you spend $4,000/month ($48,000/year), you'd need approximately $1.2 million. This aligns with the 4% rule: $1.2M × 4% = $48,000/year. Adjust based on your desired lifestyle, expected Social Security, and risk tolerance.
Is the 4% rule still valid?
Recent research suggests the safe withdrawal rate may be closer to 3.3% to 3.5% given current market valuations and lower expected future returns. However, the 4% rule remains a useful starting point. Many retirees also adjust spending based on market conditions, which improves outcomes.
When should I start saving for retirement?
As early as possible. Thanks to compound interest, someone who invests $500/month starting at age 25 will have roughly $1.1 million by age 65 (assuming 7% returns). Starting at 35 with the same amount yields only about $500,000. A 10-year head start more than doubles the outcome.