How much income the 4% rule gives, by portfolio size
A $1,000,000 portfolio supports $40,000 a year (about $3,333 a month) under the 4% rule. That is the first-year withdrawal; after that you take the same dollar amount, raised for inflation. Lower rates trade income for a longer safety margin.
| Portfolio | 3.25% / yr | 3.5% / yr | 4% / yr | 4.5% / yr | 4% / month |
|---|---|---|---|---|---|
| $250,000 | $8,125 | $8,750 | $10,000 | $11,250 | $833 |
| $500,000 | $16,250 | $17,500 | $20,000 | $22,500 | $1,667 |
| $750,000 | $24,375 | $26,250 | $30,000 | $33,750 | $2,500 |
| $1,000,000 | $32,500 | $35,000 | $40,000 | $45,000 | $3,333 |
| $1,500,000 | $48,750 | $52,500 | $60,000 | $67,500 | $5,000 |
| $2,000,000 | $65,000 | $70,000 | $80,000 | $90,000 | $6,667 |
| $3,000,000 | $97,500 | $105,000 | $120,000 | $135,000 | $10,000 |
| $5,000,000 | $162,500 | $175,000 | $200,000 | $225,000 | $16,667 |
Gross withdrawals before tax, in today's dollars. You are welcome to reproduce this table with a link to this page. Still saving toward the number? See the Coast FIRE number by age table.
What is the 4 percent rule?
The says you can withdraw 4% of a balanced portfolio in your first year of retirement, raise that dollar amount with inflation every year after, and the money will survive at least 30 years in nearly every historical market. It turns financial independence into a number: the portfolio you need is 25× your annual spending.
It came from Bill Bengen's 1994 research and the 1998 Trinity Study, which replayed US stock-and-bond portfolios across every 30-year retirement window since 1926. A 4% withdrawal survived virtually all of them, but not all.
A common misreading is that you take 4% of each year's balance. You take 4% once, in year one, then withdraw the same dollar amount, raised for inflation. In a crash your withdrawal does not shrink with your balance, which is why the first years of retirement matter most.
The formula, and why the rate is a lever
FIRE number = annual spending ÷ safe withdrawal rate (SWR)
At the classic 4%, that is spending × 25. The SWR slider is a core input because 4% is a starting point, not a law. Two adjustments run under the hood:
- Inflation is handled with real returns, converted as (1 + nominal) ÷ (1 + inflation) − 1. Naive subtraction overstates a typical 30-year portfolio by about 3–4%.
- Taxes: for pre-tax accounts, the optional tax field grosses up the target so the 4% covers what the IRS takes, not just what you spend.
Withdrawal rate to savings multiple
Divide 100 by the withdrawal rate to get your multiple of annual spending:
| SWR | Multiple of annual spending | Typically used for |
|---|---|---|
| 3.0% | 33.3× | — |
| 3.25% | 30.8× | Very early retirement |
| 3.5% | 28.6× | The modern conservative favorite |
| 4.0% | 25× | The classic Trinity figure |
| 4.5% | 22.2× | Shorter horizons or pension backstops |
| 5.0% | 20× | — |
Spending $50,000 a year means a 4% plan needs 25 × $50,000 = $1,250,000, while a cautious 3.25% plan needs about $1.54M for the identical lifestyle. Dropping from 4% to 3% costs more than eight multiples of spending (33.3× versus 25×), which on a $60,000 lifestyle is the difference between a $1.5M and a $2M portfolio. Even 3.25% versus 3.5% is more than two multiples, about $130,000 on that same lifestyle.
A worked example
Riley spends $4,000 a month ($48,000 a year) and has $150,000 invested, adding $800 a month.
- At the classic 4%: FIRE number = $48,000 × 25 = $1,200,000. Riley is 12.5% of the way there.
- At 3.5% for a 50-year horizon: target becomes ~$1.37M. The same savings rate needs roughly two more years of compounding.
- At 4.5%, because a small pension covers the floor: target drops to ~$1.07M, pulling the finish earlier.
Where the rule breaks (and what to do instead)
The 4% figure assumes a 30-year horizon, US-only history, and a rigid withdrawal pattern:
- Long horizons: retiring at 35 means a 50-year horizon, where historical success rates at 4% sag. Conservative planners use 3.25–3.5%.
- Steady spending: real retirees spend more in go-go years and less later.
- No guarantee: it is a historical frequency, not physics.
The robust modern approach is flexible: guardrails that cut withdrawals ~10% after bad market years, a cash buffer for the first recession, and a rate chosen for your horizon. Treat the verdict as a plan to revisit, not a certificate.
Sequence-of-returns risk and how to respond
Most failures come from sequence-of-returns risk. A deep crash in the first few retirement years forces you to sell shares at depressed prices to fund fixed withdrawals, shrinking every recovery that follows. The same returns in the opposite order barely dent the plan. That is why conservative planners retire on less than 4%.
The standard responses reduce first-decade pressure rather than chase returns: guardrails, a cash buffer so an early crash never forces selling at the bottom, and working one more year, which both adds contributions and removes a year of withdrawals. To stress-test the sequence, the Coast FIRE calculator and FIRE number calculator both include a crash test that replays your plan with the portfolio cut 30% on day one.
Does the 4 percent rule include Social Security?
No. The rule sizes withdrawals from your investment portfolio only. Social Security changes the problem the portfolio has to solve: if it covers $24,000 of your $48,000 annual spending, your investments only need to fund the other $24,000, which halves the target from $1.2M to $600,000 at a 4% withdrawal rate.
Model it in two phases: the portfolio funds the bridge years until benefits begin, then only the smaller shortfall. Enter the expected annual benefit and start age in the pension field of the Coast FIRE calculator and the engine splits the plan automatically. The FIRE number calculator supports the same pension input.
How cautious to be with benefit assumptions
Be honest about the start age and skeptical of the amount. The bridge years before the first benefit check are the expensive ones, and the portfolio funds them entirely. Enter a benefit you would be comfortable living without, and treat anything extra as margin.
Frequently asked questions
How much can I withdraw from $1 million with the 4% rule?
$40,000 in the first year, or about $3,333 a month, then the same amount raised for inflation each year. At a more cautious 3.5% it is $35,000 a year; at 3.25%, $32,500.
What is the 4 percent rule?
You can withdraw 4% of your portfolio in year one of retirement, raise that amount with inflation each year, and the money will very likely last 30+ years. It comes from the Trinity Study and Bill Bengen's historical simulations of US portfolios.
Is the 4% rule still valid today?
As a planning heuristic, yes; as a guarantee, no. It's based on US returns, which were kinder than most countries saw, and 30-year horizons don't fit early retirees who may need 50+ years. Modern research (Bengen himself, and Big ERN's Safe Withdrawal Series) suggests 3.25–3.5% for long horizons. The difference between 4% and 3.5% is a 14% larger portfolio.
How do I calculate my FIRE number with the 4% rule?
Multiply your annual spending by 25 (that's 100 ÷ 4). Spending $48,000 a year means a $1.2 million portfolio. At 3.25% multiply by about 31; at 4.5%, by about 22.
Does the 4% rule account for taxes and inflation?
Inflation, yes: withdrawals rise with CPI in the classic formulation. Taxes, only indirectly. The 4% is gross withdrawals, so if your portfolio is in traditional (pre-tax) accounts, set the tax-rate field and the calculator grosses up your target.
What happens if I withdraw more than 4%?
Failure probability rises non-linearly. At 5% the historical success rate drops meaningfully and the first decade's returns start dominating the outcome; at 6% you're essentially gambling on sequence of returns.
Related calculators
Put the number in context with the FIRE number calculator and savings rate calculator, or browse everything at the FireVerdict hub.