What Is the Safe Withdrawal Rate?
The safe withdrawal rate is the percentage of your retirement portfolio you can withdraw each year while minimizing the risk of running out of money. The most famous benchmark is the 4% rule, derived from the Trinity Study, which found that withdrawing 4% of an initial portfolio (adjusted for inflation thereafter) historically lasted at least 30 years across most market conditions.
How to Use This Calculator
Enter your total portfolio value and the withdrawal rate you want to test. The default is 4%, but you can model more conservative rates like 3% or 3.5% for longer retirements, or higher rates if you have other income sources. The calculator instantly shows your safe annual withdrawal and the equivalent monthly amount.
The Formula Explained
The math is simple:
$$\text{Annual Withdrawal} = \text{Portfolio} \times \frac{\text{Rate}}{100}$$The monthly figure is just the annual amount divided by 12. While the formula is basic, the rate you choose reflects deep assumptions about market returns, inflation, and how long your money must last.
Worked Example
Suppose you retire with a $1,000,000 portfolio and apply the 4% rule. Your safe annual withdrawal is
$$\$1{,}000{,}000 \times 0.04 = \$40{,}000 \text{ per year}$$or about $3,333.33 per month. If you preferred a more cautious 3.5% rate, you would withdraw $35,000 annually instead.
FAQ
Is the 4% rule still safe? It's a useful guideline, but low bond yields and longer retirements have led some experts to suggest 3% to 3.5% for added safety.
Does this account for inflation? No. The 4% rule traditionally increases the dollar amount each year for inflation. This calculator shows the first-year withdrawal based on your current portfolio.
What rate should I choose for a 40+ year retirement? Many planners recommend 3% to 3.25% for very early retirees to improve the odds of the portfolio lasting.
