4% Rule Calculator
The best-known rule in retirement planning: withdraw 4% of your starting balance in year one, then raise that dollar amount with inflation every year after. Enter your balance to see what it pays — and whether your horizon supports it.
What the rule actually says
Take 4% of the balance on the day you retire. That dollar figure, increased annually for inflation, is your income for the rest of retirement. You do not recalculate 4% of the new balance each year — that is a different strategy with different behaviour.
| Balance | Year-one withdrawal | Per month |
|---|---|---|
| $250,000 | $10,000 | $833 |
| $500,000 | $20,000 | $1,667 |
| $750,000 | $30,000 | $2,500 |
| $1,000,000 | $40,000 | $3,333 |
| $1,500,000 | $60,000 | $5,000 |
| $2,000,000 | $80,000 | $6,667 |
Where it came from
William Bengen published it in 1994 after testing every 30-year retirement window in U.S. market history, including the worst starting points — 1929 and 1966. Withdrawing 4% inflation-adjusted survived all of them. The Trinity Study in 1998 reached a similar conclusion with a different method. Neither claimed 4% was optimal; both asked what rate never failed.
How the calculator works
Each month the balance earns one month of return, then the withdrawal is taken out. The withdrawal itself rises a little every month, at the rate that compounds to your inflation figure over a full year, so your spending power stays level. If you enter a tax rate, each withdrawal is grossed up so the after-tax amount you keep matches the number you typed. The calculator stops when the balance hits zero, or after 100 years if it never does.
The "to last 20 / 25 / 30 years" figures are solved by bisection: the largest starting withdrawal that still survives that horizon under the same return and inflation assumptions.
The assumptions baked into it
- A 30-year retirement. Retire at 55 and you may need 40. The safe rate falls toward 3–3.25%.
- A 50–75% stock allocation. A bond-heavy portfolio cannot support 4% over 30 years; the growth is not there.
- No fees. A 1% advisory fee is a straight 1% off the return in this model, and it costs roughly half a percentage point off the safe rate.
- U.S. returns. The rule is calibrated on the single most successful equity market of the twentieth century.
- Rigid spending. It assumes you never adjust, which is the least realistic assumption of all.
When to use a different number
| Your situation | Reasonable rate |
|---|---|
| Retiring at 55–60, 35–40 year horizon | 3–3.25% |
| Retiring at 65, 30 year horizon | 4% |
| Retiring at 70+, 25 year horizon | 4.5–5% |
| Willing to cut spending 10% after a bad year | Add roughly 0.5% |
| Large guaranteed income covering essentials | Add roughly 0.5% |
| Paying 1% in fees | Subtract roughly 0.5% |
The failure the rule cannot see
The 4% rule is a backtest, not a guarantee. Its defence against sequence-of-returns risk is that it survived history's worst sequences — but only the ones that happened. The practical protection is flexibility: retirees who trim spending after a bad year rather than mechanically raising it with inflation almost never run out, which is why "guardrails" strategies now dominate professional practice.
Choosing realistic inputs
- Annual return. 4–5% is a conservative planning number for a balanced portfolio; 6–7% is closer to long-run history for 60/40; cash and CDs are 3–5% today but fall when rates fall.
- Inflation. The Federal Reserve targets 2%; the 30-year U.S. average is about 2.5%. Healthcare inflation runs higher, so retirees with large medical costs should test 3–3.5%.
- Withdrawal. Enter what you actually spend. Put Social Security and any pension in their own boxes, and the calculator takes them off your spending. Social Security counts from the starting age you enter. With those boxes at 0, enter only the gap that savings must cover.
Frequently asked questions
Is the 4% rule still valid?
As a benchmark, yes. As a rule to follow mechanically, no — it assumes a 30-year horizon, a stock-heavy portfolio and zero fees, and it assumes you never adjust spending. Most planners now treat 4% as a starting estimate and use a flexible rule around it.
How much do I need to retire under the 4% rule?
25 times the annual spending your savings must cover — the inverse of 4%. If savings must produce $40,000 a year after Social Security, that is $1,000,000. Apply it to the gap, not to total spending.
Does the 4% rule include Social Security?
No. It describes what your portfolio can pay. Subtract Social Security and any pension from your spending first, then apply 4% to the remaining gap.
What happens if I withdraw 5% instead?
Historically 5% failed in a meaningful share of 30-year periods, usually those starting with a bear market. Over 20–25 years it is far safer. Run both above and compare the years-remaining figure.
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SavingsLast calculators are educational estimates. They assume a constant average return and steady inflation; real markets are volatile and sequence-of-returns risk can shorten how long money lasts. Nothing here is financial, investment, tax, or legal advice. Consult a qualified professional before making decisions.
Printed from https://savingslast.com/4-percent-rule-calculator/ on . The figures reflect the inputs shown and the rules as published on that date.