The 4% Rule Explained: How Much You Can Safely Withdraw in Retirement

How much can you safely withdraw from your retirement savings each year without running out of money? The 4% rule is the most widely cited answer — and the easiest way to see how it plays out for your specific portfolio is with our 4% Rule Calculator, which projects your balance over a 30-year retirement.

What Is the 4% Rule?

The 4% rule is a retirement withdrawal guideline: in your first year of retirement, withdraw 4% of your portfolio balance, then adjust that dollar amount upward each year for inflation. It was designed for a 30-year retirement horizon.

Example: With a $1,000,000 portfolio, you withdraw $40,000 in year one. If inflation is 3%, you withdraw $41,200 in year two — not 4% of the new balance, but $40,000 plus inflation.

The Trinity Study

The rule comes from the Trinity Study, published in 1998 by three professors at Trinity University. The researchers analyzed historical market returns to find withdrawal rates that survived 30-year retirements:

• 3% withdrawal rate: Survived 30 years in roughly 100% of historical scenarios
• 4% withdrawal rate: Survived in about 95% of scenarios
• 5% withdrawal rate: Survived in roughly 80% of scenarios
• 6%+ withdrawal rate: Significant failure risk

The 4% figure was chosen as a balance between safety and a comfortable income.

Why the 4% Rule Works

The rule works because of portfolio growth during retirement. Historically, a 60% stock / 40% bond portfolio has returned about 7-8% annually before inflation. Even after withdrawing 4% (plus inflation), the remaining portfolio usually grows, which is why most retirements finished with more than they started.

What can go wrong: Sequence of returns risk. If the market drops sharply in your first few years of retirement, the damage compounds because you are selling investments at a loss. The 4% rule's ~95% success rate already accounts for this, but it is the main reason the rule fails when it does.

The 4% Rule by the Numbers

Using the 4% rule, here is your first-year withdrawal for common portfolio sizes:

• $500,000 portfolio: $20,000/year ($1,667/month)
• $750,000 portfolio: $30,000/year ($2,500/month)
• $1,000,000 portfolio: $40,000/year ($3,333/month)
• $1,500,000 portfolio: $60,000/year ($5,000/month)
• $2,000,000 portfolio: $80,000/year ($6,667/month)

The 25x Rule

The 4% rule has a useful inverse: multiply your desired annual spending by 25 to find your target portfolio size. Want $50,000/year in retirement? You need $1.25 million invested.

Quick examples:

• $30,000/year spending → $750,000 needed
• $40,000/year spending → $1,000,000 needed
• $60,000/year spending → $1,500,000 needed
• $80,000/year spending → $2,000,000 needed

When the 4% Rule Needs Adjusting

Retiring early (longer than 30 years)

The 4% rule was built for 30-year retirements. For a 50+ year horizon (common in FIRE), financial planners often recommend 3-3.5%. At 3%, a $1,000,000 portfolio supports $30,000/year.

Low expected returns

If you expect returns below historical averages, lower your withdrawal rate. A 2.5-3% rate is more defensible in a low-return environment.

A conservative portfolio

The rule assumes significant stock exposure. A portfolio that is mostly bonds or cash may not grow enough to sustain 4% withdrawals.

Common 4% Rule Mistakes

Withdrawing 4% of the current balance each year: The rule is 4% of the initial balance, adjusted for inflation — not 4% of whatever the portfolio is worth each year.

Ignoring inflation adjustments: Withdrawing a flat amount loses purchasing power every year. Your standard of living quietly declines.

Using 4% for short retirements: If you only need money for 10-15 years, a higher withdrawal rate is mathematically fine — but using 4% wastes growth potential.

Not adjusting for taxes: $40,000 withdrawn is not $40,000 spent. Tax-advantaged accounts (Roth IRA, HSA) change the picture significantly.

A Real-World Check

According to Morningstar's 2025 retirement research, a 4% initial withdrawal rate had a 91% success probability for a 30-year retirement with a 40% stock allocation — and 98% with a 60% stock allocation. For early retirees planning 40+ years, Morningstar recommends starting at 3.3%. As of August 2026, those figures remain the current benchmark for planning.

Conclusion

The 4% rule is a simple, research-backed starting point, not a guarantee. Adjust it for your timeline, spending, and risk tolerance — and revisit it every year. Enter your numbers into our 4% Rule Calculator to see exactly how long your portfolio would last under different withdrawal rates.