Retirement · Withdrawal rates
4% rule calculator.
Turn yearly spending into the portfolio you need at a 4% withdrawal rate (25x), and compare it with lower and higher rates so you can see how much a cautious rate costs.
Portfolio needed = yearly spending ÷ withdrawal rate. At 4% that is 25 times spending, so $40,000 a year needs $1,000,000. At 3.5% it is $1,142,857. The 4% figure is a rule of thumb from US market history, not a guarantee.
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Where the 4% rule comes from
Wikipedia credits financial planner William Bengen with first articulating the 4% withdrawal rate as a rule of thumb for retirement savings, later popularized by the 1998 Trinity study. The 4% refers to the share of the portfolio withdrawn in the first year; in later years the dollar amount rises with consumer prices. Because 1 ÷ 0.04 = 25, the FIRE community often states it as saving 25 times yearly spending.
Worked example. Spending $40,000 a year: at 4% you need 40,000 ÷ 0.04 = $1,000,000 (25x). At 3.5% you need $1,142,857 (28.6x), at 3.25% $1,230,769 and at 3% $1,333,333. If you have $750,000, $40,000 is 5.33% of it, a 4% withdrawal pays $30,000 a year ($2,500 a month), and you are $250,000 short of the 4% target.
Limits. The Trinity study tested US stock and bond mixes using data from 1925 to 1995 and payout periods of 15 to 30 years. Bengen later described 4% as a worst-case figure for a US retiree, based on someone who retired in 1968 at a market peak. Wikipedia’s FIRE article notes that some researchers, including economist Karsten Jeske, argue early retirees facing 50-plus years should use a more conservative 3.25 to 3.5%. Nothing here shows the same result would hold for Canadian or other markets, or for your tax situation.
Frequently asked questions
What is the 4% rule?
A rule of thumb that you can withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year, with a high historical chance of the money lasting about 30 years in US data.
How do I get the 25x number?
Divide 1 by the withdrawal rate. 1 ÷ 0.04 = 25, so multiply yearly spending by 25. At 3.5% the multiple is 28.6.
Is 4% safe for early retirement?
The Trinity study covered payout periods of 15 to 30 years. Some researchers argue for 3.25 to 3.5% for retirements of 50 years or more. Treat 4% as a starting point, not a guarantee.
Does the 4% rule work in Canada?
The studies behind it used US market data. This page does not show the result is the same elsewhere, so test a lower rate and keep your plan flexible.
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Runs entirely in your browser. Nothing you type is sent or stored. Formulas are standard arithmetic; assumptions such as returns are yours to set.
Not advice
The 4% rule is a rule of thumb from historical US data, not a promise or advice. Not financial, tax or investment advice.