How the 4% rule works
Under the 4% rule you withdraw 4% of your portfolio in the first year of retirement, then increase that dollar amount by inflation each year, regardless of market performance. With $1,000,000 that's $40,000 in year one, $41,000 in year two at 2.5% inflation, and so on.
This calculator applies that method with a steady return each year:
Withdrawal(next year) = Withdrawal × (1 + inflation)
The limits of a steady-return projection
Real markets don't return 6% every year. The order of returns matters: a crash in the first few years of retirement (sequence-of-returns risk) can deplete a portfolio even if average returns are fine. The historical 4% rule was tested against actual sequences, including the 1929 crash and 1970s inflation, which is why it's lower than the average return. Use this calculator to understand the mechanics, and keep a margin of safety by:
- Using a lower withdrawal rate (3.25% to 3.5%) for retirements longer than 30 years.
- Cutting spending a little in bad market years (a "guardrails" approach).
- Holding 1 to 2 years of spending in cash or bonds.
Frequently asked questions
Is the 4% rule still valid?
Should withdrawals rise with inflation?
What return should I assume?
Last reviewed: 2026-10-09