4 Percent Rule Calculator
A 4 percent rule calculator shows what happens to a retirement balance when you withdraw from it every year. Ours runs the arithmetic, year by year, under a return and an inflation rate you choose. It is an illustration under those assumptions, not a forecast, and it never says what withdrawal rate is right for anyone.
What the 4% rule says
The 4% rule comes from a 1994 study of U.S. market history by William Bengen, a financial planner. It describes withdrawing 4% of a portfolio in the first year of retirement, then raising that dollar amount with inflation every year after, whatever the portfolio does. The 4% applies only in the first year. Withdrawing 4% of the current balance every year is a different, flexible rule; the calculator runs the classic one. The rule is a description of the past, not a promise about the future. What is the 4% rule? explains where it comes from and what it assumes.
How to use ours
- Enter a starting balance and a first-year withdrawal, as a percent or in dollars. The two boxes are linked.
- Choose the number of years, a yearly return, and a yearly inflation rate. One steady rate is used every year. Three presets set the return to the platform's own long-term planning assumptions for a savings account, a mostly-bonds mix, and a balanced mix. Inflation raises the withdrawal each year after the first. They are assumptions, not forecasts, and not a recommendation of any mix.
- Read the result. The calculator shows the ending balance, whether the balance runs short under your assumptions, a chart, and a year-by-year table. Nothing you enter is stored.
A worked example
The calculator opens on $1,000,000, a first-year withdrawal of 4%, 30 years, a return of 5.7% a year (the balanced preset, 60% stocks, 40% bonds), and inflation of 3% a year:
- The first-year withdrawal is 4% of $1,000,000, or $40,000. It rises 3% a year, to $41,200 in year 2 and $94,263 in year 30.
- Each withdrawal comes out at the start of the year, and what is left earns that year's return.
- Under these assumptions, the balance does not run out in 30 years: about $815,467 is left at the end, about $335,962 in today's dollars at the inflation rate you chose.
| Year | Balance at start | Withdrawal | Share of balance | Balance at end |
|---|---|---|---|---|
| Year 1 | $1,000,000 | $40,000 | 4% | $1,014,720 |
| Year 2 | $1,014,720 | $41,200 | 4.06% | $1,029,011 |
| Year 10 | $1,111,138 | $52,191 | 4.7% | $1,119,307 |
| Year 20 | $1,123,362 | $70,140 | 6.24% | $1,113,255 |
| Year 30 | $865,755 | $94,263 | 10.89% | $815,467 |
The calculator shows these same figures for this example, computed by the same code.
What it leaves out
- Sequence of returns risk. Real returns arrive unevenly. Two retirements with the same average return can end very differently if the poor years come first, because withdrawals taken in a down market sell more of the portfolio. A steady yearly return, like the one here, cannot show that.
- Fees. Fees come out of the portfolio every year and are not modeled here. Lower the return to see their effect.
- Taxes. A withdrawal from a tax-deferred account is not all spending money. Taxes are not modeled.
- The asset mix. The research behind the rule used roughly half to three quarters stocks. A very different mix is a different question.
- The horizon. The original research tested 30-year retirements. A longer retirement is outside what it tested.
- Everything else in a plan. Social Security, pensions, spending that changes over time, and one-time costs all change what a portfolio has to supply.
The first item matters most. A steady return makes every year look alike. Real markets do not, and a few poor years early in retirement can matter more than the average. What is sequence of returns risk? shows it with a worked example.
Related
- What is the 4% rule? An explainer on multi-cycle.com.
- What is sequence of returns risk? An explainer on multi-cycle.com.
- How the size of the swings changes outcomes: the portfolio volatility calculator guide.
- Multi-Cycle Planning: all of the free tools.