Safe withdrawal rate

Calculating the safe withdrawal rate can be as simple as using the 4 percent rule, a classic rule of thumb for financial planners. The 4 percent rule refers to withdrawing 4 percent of your portfolio's balance each year in retirement, using the portfolio's balance when you retire to calculate your withdrawals.

Is 5% a safe withdrawal rate?

The sustainable withdrawal rate is the estimated percentage of savings you're able to withdraw each year throughout retirement without running out of money. As an estimate, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement, then adjust that amount every year for inflation.

Is the 4% rule safe?

In recent years, some have questioned whether the 4% rule remains valid. They point to low expected returns from stocks given high valuations. They also point to low yields on fixed income securities. While both concerns are real, the 4% rule has been proven reliable through a wide range of difficult markets.

How do you calculate safe withdrawal rate?

Safe withdrawal rate = annual withdrawal amount ÷ total amount saved.

What is the 4% withdraw rule?

One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments, and withdraw 4% of that total during your first year of retirement.