Retirement Example
The 4% Rule Explained — Retirement Withdrawal Examples
How the 4% rule works and what it means for your retirement savings target.
Scenario
How much do you need? Work backwards from your desired retirement income.
Inputs
RuleWithdraw 4% of portfolio in Year 1, then adjust for inflation
Results
$30k/year income → need $750k
$40k/year income → need $1,000,000
$50k/year income → need $1,250,000
$60k/year income → need $1,500,000
Explanation
The 4% rule came from the Trinity Study (1998): a diversified portfolio can safely support 4% annual withdrawals for 30 years. For 40+ year retirements, some planners use 3–3.5% to be safe. Social Security reduces the portfolio needed proportionally.
Key Takeaways
- 4% rule assumes 50–75% stocks. A conservative 30% stock portfolio may not support 4%.
- Flexibility (spending less in bad market years) extends portfolio life significantly.