4 Percent Rule Calculator
Estimate the portfolio size needed to support a target level of annual spending using a chosen withdrawal rate.
How to use this page
The 4 percent rule is a rough planning shortcut. It tells you how large a portfolio might be needed if you want first-year withdrawals to equal about 4% of the balance. It does not guarantee success in every market or every retirement length.
For many people the value of this page is not precision. It is speed. You can quickly translate spending into a capital target before moving on to your contribution plan.
Example
If you want $40,000 per year and use a 4% withdrawal rate, the target portfolio is about $1,000,000. If you prefer a more conservative 3.5% rate, the required portfolio rises.
What the 4% rule says, and what it does not
The 4% rule comes from research into historical US portfolios: withdraw 4% of the starting balance in year one, increase that dollar amount with inflation each year afterwards, and the portfolio survived a 30-year retirement in almost every historical period tested. It is a finding about the past, offered as a planning heuristic.
| Withdrawal rate | Portfolio multiple needed | For $40,000 a year | For $60,000 | For $80,000 |
|---|---|---|---|---|
| 3.0% | 33× | $1,333,333 | $2,000,000 | $2,666,667 |
| 3.5% | 29× | $1,142,857 | $1,714,286 | $2,285,714 |
| 4.0% | 25× | $1,000,000 | $1,500,000 | $2,000,000 |
| 4.5% | 22× | $888,889 | $1,333,333 | $1,777,778 |
| 5.0% | 20× | $800,000 | $1,200,000 | $1,600,000 |
Multiple = 1 ÷ withdrawal rate. Figures are before tax.
Read the multiple column rather than the dollar columns. A 4% rate means 25 times your annual spending; 3% means 33 times. That difference — eight times annual spending — is often several additional years of work, which is why the choice of rate matters far more than most retirement discussions admit.
The rule assumes a roughly 50–75% equity portfolio, a 30-year horizon, US historical returns, and that you increase withdrawals with inflation and never adjust for market conditions. Change any one — a 45-year early retirement, a bond-heavy portfolio, a different country's market history — and the safe rate changes with it. It was never intended as a universal constant.
What actually makes the rule hold or fail
- Sequence of returns. A severe fall in the first few years is what breaks a withdrawal plan. The same average return with the bad years later is survivable; with the bad years first it may not be.
- Flexibility. Retirees who reduce spending in bad years succeed at far higher rates than the fixed-withdrawal model assumes. Rigidity is the risk, not the rate.
- Fees. A 1% annual charge comes directly out of the sustainable rate. A 4% withdrawal from a portfolio costing 1% behaves much like a 5% withdrawal from a free one.
- Horizon length. Thirty years is the tested figure. Retiring at 45 means planning for 45 or more, where a lower rate is the sensible response.
- Other income. A pension or state benefit starting later reduces how much the portfolio must cover in the interim, which changes the whole calculation.
The safe withdrawal rate calculator lets you test other rates directly, and the financial independence calculator works from annual spending to the portfolio it implies.
Questions about the 4% rule
What is the 4% rule?
Withdraw 4% of your portfolio's starting value in the first year of retirement, then increase that dollar amount with inflation each year. It implies a portfolio of 25 times your annual spending.
Is the 4% rule still valid?
It remains a reasonable starting point and a poor stopping point. Longer retirements, lower expected bond yields and non-US markets all argue for something more conservative; flexibility in spending argues the other way.
How much do I need to retire on $40,000 a year?
At 4%, about $1,000,000. At 3.5%, $1,142,857. At 3%, $1,333,333. All before tax.
Does the 4% rule account for taxes?
No. The withdrawal is gross, and what you can spend depends on your account types and tax position. Plan on the after-tax figure, which usually means a larger portfolio than the headline multiple suggests.