4% Rule (Retirement Withdrawal)
The 4% rule suggests withdrawing 4% of your initial portfolio in the first year, then adjusting for inflation annually, with a high probability of not running out of money over 30 years.
Exam Tip
4% rule = Trinity Study. Assumes 30-year retirement. Early retirees may need 3-3.5%.
What is the 4% Rule?
The 4% rule is derived from the Trinity Study (1998) for sustainable retirement withdrawals.
How It Works
| Year | Calculation |
|---|---|
| Year 1 | 4% × Initial Portfolio |
| Year 2+ | Previous + inflation |
Assumptions
- 30-year retirement
- 50-75% stocks
- Annual rebalancing
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