Safe Withdrawal Rate Calculator
Stress-test the 4% rule against your portfolio and spending. See how long your nest egg lasts under pessimistic, base, and optimistic return scenarios with inflation-adjusted withdrawals.
Withdrawal rate
4%
Base depletes at year 33. The classic 4% rule (Bengen 1994) targets 25× annual spending. Perpetual draw at 5% real return: $50,000/year.
Base case lasts
33 yrs
Pessimistic lasts
25 yrs
Perpetual safe draw
$50,000
- Three deterministic scenarios: pessimistic (base real return − 2%), base, and optimistic (base + 2%). Each runs on a constant-return assumption — no sequence-of-returns risk is modeled.
- Spending increases with inflation each year. The withdrawal happens at the start of each year, then the remainder grows at the real return — the same model Bengen used in the 1994 Trinity study.
- "Perpetual withdrawal rate" =
portfolio × realReturn. This is the amount you can draw indefinitely without touching principal. It does not adjust for inflation. - Taxes are not modeled. Ordinary income, Roth, and capital-gains rates all affect the true after-tax withdrawal amount. A 4% draw from a pre-tax 401k funds a smaller real lifestyle than the same draw from a Roth.
- The "4% rule" was empirically derived from US historical data (1926–1992) by William Bengen. Global portfolios, lower bond yields, and higher current valuations suggest that 3–3.5% may be more appropriate for conservative plans today.
The 4% rule and its limits
The 4% rule comes from the 1994 research by financial planner Bengen, who analyzed historical US market data and found that withdrawing 4% of your portfolio in year one, then adjusting that dollar amount for inflation each subsequent year, had a success rate of over 90% across 30-year retirement periods. It became the default guideline for retirement planners.
But the 4% rule has limitations. It was based on a 50/50 stock-bond portfolio, assumes fixed inflation-adjusted withdrawals regardless of market performance, and doesn't account for today's market valuations or lower bond yields. Some researchers suggest 3–3.5% is safer for long retirements, while others argue that flexible spending (reducing withdrawals in bad years) can support rates closer to 5%.
Why it matters to your money
Your withdrawal rate is the single most important decision in retirement planning. Set it too high and you'll run out of money. Set it too low and you'll live more conservatively than necessary. The sequence of returns risk — experiencing poor returns early in retirement when your portfolio is smallest — is particularly dangerous and is why this calculator lets you model pessimistic, base, and optimistic scenarios.
Rules of thumb
- 4% is a starting point: For retirements before 65, consider 3–3.5% to account for the longer time horizon. For retirements after 70, 4–4.5% may be acceptable.
- Flexibility increases sustainability: If you can reduce spending in bad years (or shift withdrawals from portfolio to Social Security/work income), you can safely withdraw more in good years.
- Sequence risk is most severe in years 1–10: A 20% market decline in your first retirement year can permanently damage your portfolio. Keeping 2–3 years of expenses in cash is a proven buffer.
Frequently asked questions
- What is a safe withdrawal rate?
- A safe withdrawal rate is the percentage of your portfolio you can withdraw annually in retirement without running out of money over a 30-year period. The landmark Bengen study found 4% to be safe across historical US market cycles.
- Is the 4% rule still valid today?
- It's debated. Some researchers suggest 3–3.5% is more appropriate given today's lower bond yields and higher valuations. Others argue 4.5–5% is fine for flexible spenders. This calculator lets you model different rates and return scenarios.
- How does sequence of returns risk affect retirement?
- Sequence of returns risk is the danger of experiencing poor investment returns early in retirement. A bad first decade of returns can deplete a portfolio even if long-term averages are fine, because you're withdrawing while the portfolio is down.
- How can I reduce the risk of running out of money in retirement?
- Strategies include: a lower initial withdrawal rate, flexible spending (reducing withdrawals in bad years), delaying Social Security to maximize benefits, holding a cash buffer, and maintaining some equity allocation for growth.