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Retirement Planning

What Is the 4% Rule?

Andrea Coombes

Written by Andrea Coombes
Edited by Carolyn Kimball
Fact-checked by Dayana Yochim

March 01, 2024

The 4% rule is a useful rule of thumb that tells you how much money you can safely withdraw from your savings when you retire. Plus, a bonus: The 4% rule gives you a rough estimate of how much money you need to save for retirement while you’re still working.

Quick take: The 4% rule says you can safely withdraw 4% of the money in a diversified retirement portfolio each year in retirement without running out of money for about 30 years. As with all rules of thumb, there are some caveats — more on those below. A handy side benefit of this rule is that it gives you a rough estimate of how much you should save for retirement: 25 times the amount of annual retirement income you need your retirement portfolio to produce.

Tell me more! A safe withdrawal rate is the percentage of your retirement savings in a diversified investment portfolio that you can safely withdraw each year while still having your money last about 30 years. The 4% rule is based on these assumptions:

  • Your money is invested in a diversified portfolio of at least 50% stocks and the rest bonds; you withdraw 4% each year; and starting in the second year you adjust your withdrawal rate in line with inflation.
  • The original concept is based on a study that included the Great Depression and other crashes — 4% was found to be the safe withdrawal rate for a long-lived portfolio despite major market upheaval. The idea is, this is a super safe withdrawal rate.
  • The 4% rule simply connects a safe withdrawal rate to a lump sum of savings. Here’s how to make this work in real life:
    • Figure out how much income you need each year in retirement. (For a very rough estimate, use your current annual spending amount, minus what you’re putting into retirement savings.)
    • Next, subtract from that amount any other sources of retirement income, such as Social Security.
    • The remaining number is the amount of income you need your retirement savings to produce each year.

For example, say you need a total of $70,000 a year in retirement, your expected annual Social Security benefit is $25,000, and you expect no other sources of retirement income. That means your portfolio needs to produce $45,000 a year. If you rely on the 4% rule, then you need to save a total of $1,125,000 (i.e. $55,000 times 25).

One more thing: It seems that for every financial expert who praises the 4% rule, there’s another one decrying it. Some people say 4% is too high a number; others say it’s too low and you can safely withdraw more. So use the 4% rule as a starting point rather than your do-or-die rule. For a takedown of some of the criticisms of the 4% rule, check out this blog post by Michael Kitces, chief financial planning Nerd at, and head of planning strategy at Buckingham Wealth Partners. Meanwhile, Morningstar, the investment research company, also has thoughts.

Bottom line: The 4% rule can be a useful tool for estimating how much money you need to save on the road to retirement, and how much money you can safely withdraw once you retire. As with all rules of thumb, however, your actual circumstances and needs may vary. Why not talk to a financial advisor before you retire?

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About the Editorial Team

Andrea Coombes
Andrea Coombes

Andrea Coombes has 20+ years of experience helping people reach their financial goals. Her personal finance articles have appeared in the Wall Street Journal, USA Today, MarketWatch, Forbes, and other publications, and she's shared her expertise on CBS, NPR, "Marketplace," and more. She's been a financial coach and certified consumer credit counselor, and is working on becoming a Certified Financial Planner. She knows that owning pets isn't necessarily the best financial decision; her dog and two cats would argue this point.

Carolyn Kimball
Carolyn Kimball

Carolyn Kimball is Managing Editor for Reink Media Group and the lead editor for content on Carolyn has more than 20 years of writing and editing experience at major media outlets including NerdWallet, the Los Angeles Times and the San Jose Mercury News. She specializes in coverage of personal financial products and services, wielding her editing skills to clarify complex (some might say befuddling) topics to help consumers make informed decisions about their money.

Dayana Yochim
Dayana Yochim

Dayana Yochim has been writing (articles, books, podcasts, stirring speeches) about personal finance and investing for more than two decades, focusing on bringing clarity and the occasional comedic aside to what is often a murky, humorless topic. She’s written for NerdWallet, The Motley Fool,, Woman’s Day, Forbes, Newsweek and others, and been a guest expert on "Today," "Good Morning America," CNN, NPR and wherever they’ll hand her a mic.

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