Retirement Spending Calculator

Retirement Spending Calculator: Based on the 4% Rule

The 4% rule was created by William Bengen in 1994. The basic principle of the 4% rule is to withdraw 4% in the first year of retirement and adjust the subsequent years based on previous year’s inflation rate. Bengen determined several key points often overlooked.

1. Steady Withdrawal: Even with several good years of market returns early in retirement, do not increase your withdrawal rate as positive return years need to balance years of negative returns.
2. Beware of Inflation: Inflationary periods have the most negative consequences to retirement portfolios; even in comparison to events resulting in more negative returns but a deflationary environment.
3. 30 Year Window: All of Bengen’s assumptions were based on a minimum of 30 years needed for retirement. Individuals in the FIRE movement may be surprised to see that the 4% rule was not intended for those retiring in their 30’s with 50+ years in retirement.
4. Early Years: Early in retirement, individuals retiring before 60 should not exceed a 4% withdrawal.

Apply different strategies using the variables below. Click on “Share this Scenario” to save your results. Learn more about the rule in the following articles: [4% Rule Explained] and [Updated 4% Rule Chart and FIRE Movement].

References: Bengen, W. P. (1994). “Determining withdrawal rates using historical data.” Journal of Financial Planning, 7(4), 171–180.