The 4% Rule: How Much You Need to Retire
The 4% rule says you can withdraw 4% of your portfolio in the first year of retirement, adjust for inflation after, and have the money last about 30 years. It turns the vague question "how much is enough" into simple arithmetic.
This guide explains where the rule came from, how to use it, and why it is a starting point rather than a law.
The simple math
Need $60,000 a year? Divide by 4%: $60,000 / 0.04 = $1,500,000. Equivalently, save 25 times your annual spending.
The $60,000 should be spending beyond guaranteed income like pensions; subtract those first, then multiply the remainder by 25.
This is why the FIRE movement talks about 25x: it is just the 4% rule rearranged.
Where 4% came from
The Trinity study tested withdrawal rates against historical US market data. 4% survived most 30-year periods for stock-heavy portfolios; higher rates failed more often.
"Survived" meant the money lasted, sometimes barely. It is a worst-case-tested guideline, not an average outcome.
The study assumed specific portfolios and US history. Different countries, fees and allocations change the safe rate.
Limits and adjustments
Retiring very early, say at 40, needs a lower rate, often 3 to 3.5%, because the money must last 50+ years.
High fees directly reduce the safe rate: a 1% fee arguably turns 4% into 3%.
Flexible spending beats rigid rules. Cutting withdrawals after bad market years dramatically improves survival; dynamic strategies often beat fixed 4%.
Building toward the number
Work backwards: target minus current savings, divided by years, adjusted for growth. $1.5M in 20 years at 7% needs about $2,900 a month from zero.
Employer matches are free return: capture the full match before taxable investing.
Revisit yearly. The number moves with spending, markets and life; the rule is a compass, not a contract.
Want the number right now? Run the matching calculator.
Try the Safe Withdrawal calculatorFrequently asked questions
What is the 4% rule?
Withdraw 4% in year one of retirement, adjust for inflation yearly; historically lasted 30 years in most cases.
How much do I need to retire?
Roughly 25 times your annual spending after other income.
Is 4% still safe?
It is a reasonable starting point; early retirees and high-fee investors should use lower rates.
Does it work outside the US?
Less tested; be more conservative with different market histories.
What about inflation?
The rule adjusts withdrawals for inflation each year by design.
Can I withdraw more in good years?
Flexible strategies that spend more after gains and less after losses outperform rigid rules.