The 4% Rule Explained
The most cited rule of thumb in early retirement — where it comes from, what it assumes, and its limits.
Last updated: 2026-07-20
The 4% rule is a simple guideline for how much you can safely withdraw from retirement savings each year without running out. It's popular for a reason, but it's a starting point, not a guarantee.
Where it comes from
It's based on historical US market data showing that withdrawing 4% of your initial portfolio in year one, then adjusting that dollar amount for inflation each year, would have lasted at least 30 years across most historical periods. The flip side gives your target: about 25 times your annual spending.
What it assumes
- A roughly 30-year retirement horizon.
- A diversified stock-and-bond portfolio.
- Steady, inflation-adjusted withdrawals regardless of market conditions.
Its limits
Longer retirements, lower expected future returns, or a bad market early on (sequence-of-returns risk) can all strain the rule. Many early retirees use a more conservative 3–3.5% for a bigger safety margin. Explore your own numbers with the calculators below.