Safe Withdrawal Rate

Safe withdrawal rate is the percentage of a retirement portfolio you can withdraw each year with a reasonably high probability the money lasts through a typical 30-year retirement without running out. The most commonly cited benchmark is 4%, based on historical research testing withdrawal rates against decades of past market returns.

Under the 4% rule, you withdraw 4% of your portfolio's value in the first year of retirement, then adjust that dollar figure for inflation in subsequent years, rather than recalculating 4% of the current balance annually. The Retirement Calculator uses this kind of framework to estimate how much you need saved before retiring.

Required Portfolio = Annual Expenses (not covered by other income) / Safe Withdrawal Rate

At a 4% rate, this simplifies to 25 × Annual Expenses.

Someone expects to spend $70,000 a year in retirement, with $20,000 covered by Social Security, leaving $50,000 to come from their portfolio.

• Required portfolio: $50,000 / 4% = $1,250,000

In year one of retirement, they'd withdraw $50,000 (4% of $1.25 million), then adjust that amount upward each year for inflation, not recalculate 4% of the portfolio's fluctuating balance.

• The 4% figure is historically derived, not a mathematical guarantee. It's based on past market conditions and doesn't account for unprecedented future scenarios.
• Withdrawals adjust for inflation, not portfolio performance. This is a key detail people miss, the rule specifies inflation-adjusted dollar withdrawals, not a percentage of the current balance each year.
• A more conservative rate suits longer or uncertain retirements. Someone retiring early, potentially needing 40+ years of withdrawals, often targets 3-3.5% instead of the standard 4%.
• Sequence of returns risk matters most in early retirement years. A market downturn shortly after retiring, while withdrawals are happening, poses more risk than the same downturn occurring later, even with an identical average return.
• It's a planning benchmark, not a rigid rule. Many retirees adjust spending flexibly based on actual portfolio performance rather than following a fixed inflation-adjusted withdrawal mechanically every year.