4% rule

The 4% rule is a rough benchmark, not a guarantee. It was built on US market history and assumes a 30-year retirement with a mixed portfolio of stocks and bonds.

Under the rule, you withdraw 4% of the portfolio value in the first year. In later years, you increase the withdrawal by inflation. The portfolio therefore needs to outpace both withdrawals and rising prices.

Critics point out that future returns may be lower than the historical average, and that early retirees face longer time horizons. Many planners now use 3% to 3.5% as a safer starting point.