The 4% Rule — Your Retirement Income Formula
The 4% rule says you can withdraw 4% of your portfolio in the first year of retirement, then adjust for inflation each year, without running out of money for 30 years.
How It Works
| Portfolio Size | Annual Withdrawal (4%) | Monthly Income |
|---|---|---|
| $500,000 | $20,000 | $1,667 |
| $750,000 | $30,000 | $2,500 |
| $1,000,000 | $40,000 | $3,333 |
| $1,500,000 | $60,000 | $5,000 |
| $2,000,000 | $80,000 | $6,667 |
The 25x Rule (Reverse)
Want $5,000/month in retirement? $5,000 × 12 × 25 = $1,500,000 needed. This is the savings target.
Limitations
The 4% rule assumes 50/50 stock-bond portfolio. Actual safe withdrawal rate may be 3.3-3.5% in low-return environments. Consider flexible withdrawal — spend less in down years, more in good years.