Safe Withdrawal Rate Calculator

What is the 4 percent rule and who found it?

A 4 percent rule calculator multiplies a starting portfolio by 4% to give the first year’s withdrawal, then raises that dollar amount by inflation each year so it keeps its buying power; the reverse form divides the income you need by 4% — a 25× multiple — to give the portfolio required.

The rule rests on William Bengen’s 1994 paper "Determining Withdrawal Rates Using Historical Data" in the Journal of Financial Planning, which tested every retirement start year from 1926 using Ibbotson data for large-company stocks (the S&P 500) and intermediate-term Treasuries.

Bengen’s findings, in his own figures: a 3% first-year withdrawal gave at least 50 years of inflation-adjusted withdrawals in every start year; at 4%, "in no past case has it caused a portfolio to be exhausted before 33 years"; at 5%, retirees who started in the late 1960s and early 1970s "might have had only 20 years of funds". His conclusion: "Assuming a minimum requirement of 30 years of portfolio longevity, a first-year withdrawal of 4 percent, followed by inflation-adjusted withdrawals in subsequent years, should be safe", with a stock allocation "as close to 75 percent as possible, and in no cases less than 50 percent".

The withdrawal in his model is taken at the end of each year, after that year’s return, and the next year’s amount is last year’s plus an inflation factor — exactly the path this calculator draws.

What did the Trinity study find about the 4% rule?

Three Trinity University professors — Cooley, Hubbard and Walz — asked a different question in the February 1998 AAII Journal: not the worst case, but the share of historical 30-year periods a given rate survived. Using 1926–1995 data, a 50% stock / 50% bond portfolio with a 4% inflation-adjusted withdrawal survived 95% of 30-year periods.

The authors updated the work in Financial Counseling and Planning (1999) through 1997; that table is reproduced beneath the chart on this page: at 4% over 30 years, 100% of periods survived with 75% stocks, 98% with 100% stocks, 95% with 50% stocks, 74% with 25% stocks and 19% with all bonds.

The two studies agree on the shape of the result: 3% survived every period in every mixed allocation, 4% survived nearly all of them when at least half the portfolio was in stocks, and 5% or more failed often. They disagree in emphasis — the Trinity authors wrote that 3% and 4% "appear to be excessively conservative" for retirees willing to accept some risk, while Bengen framed 4% as the floor a planner could call safe.

Both are backward-looking counts of what happened in US markets, with monthly or annual rebalancing and no fees, taxes or spending changes. They are evidence for a planning rule, not a probability for any future retirement.

How does the 25× rule work in reverse?

The 25× rule used in the financial-independence (FIRE) community is the 4% rule turned around: 1 ÷ 0.04 = 25, so $40,000 of annual spending from the portfolio needs $40,000 × 25 = $1,000,000. Lower the rate and the multiple rises: 3.5% is 28.6× ($1,142,857 for $40,000), 3.33% is 30× ($1,200,000) and 3% is 33.3× ($1,333,333).

The "Annual income → Target nest egg" direction on this page does that division for any rate. The rule applies to spending the portfolio must cover. Income from Social Security, a pension or part-time work is subtracted first; only the gap is multiplied. A household spending $60,000 with $24,000 of Social Security needs 25 × $36,000 = $900,000 at 4%, not $1,500,000.

Why is "safe" not a guarantee?

In the literature "safe" means a rate that did not empty the portfolio in the historical periods tested: 1926–1995 (or 1997) US stock and bond returns, a fixed allocation and a 30-year horizon. Change any of those — a longer retirement, another asset mix, fees, an unseen sequence of returns — and the finding does not transfer automatically.

The mechanism behind the failures is the order of returns. A retiree who withdraws a fixed real amount while prices are falling in the first years sells more shares at low prices, and the portfolio never fully recovers even when average returns later match the long-run figure. The balance path on this page uses one constant return and so cannot show that; it is the arithmetic of the rule, not a test of it.

For a retirement longer than 30 years, Bengen’s own data is the published guide: 3% lasted at least 50 years in every start year, and his charts for 4% show some start years exhausting between 33 and 50 years. Many early-retirement writers use 3% to 3.5% for that reason; that is a choice about margin, not a figure from either study.

What does this 4% rule calculator do, and not do?

It does the rule’s arithmetic exactly — first-year withdrawal, monthly figure, multiple, the same at 3% to 5% — and then draws a deterministic balance path under the return and inflation you enter, with every figure in nominal dollars and the withdrawal indexed so it keeps year-1 buying power.

The year-by-year schedule shows the gross withdrawal, the net after any flat tax rate you enter, and the closing balance.

It does not run historical sequences or a Monte Carlo simulation, does not show a probability of success, and does not recommend a rate. Dynamic rules that cut or freeze spending after a bad year — guardrails, variable-percentage withdrawal — are different plans and are not modelled; nor are fees, which lower the return you should enter, or the 10% additional tax on distributions before 59½ (IRC §72(t)), which is named in Advanced and not computed.