Safe Withdrawal Rate (4% Rule)
The safe withdrawal rate is the share of your retirement savings you can spend in the first year — then adjust for inflation — without running out over a long retirement. The classic benchmark is 4%, which historically lasted 30 years in most market scenarios.
Inverted, it becomes a savings target: 25 times the annual income you want from the portfolio, so $40,000 a year needs about $1,000,000 and $60,000 needs $1,500,000 — before Social Security, which for a median earner covers a substantial part of the gap. The 4% figure came from testing historical US 30-year retirements, which is the assumption to check against your own case: a retirement expected to last 40 years argues for less. The main risk it addresses is sequence of returns — a severe fall in the first few years does far more damage than the same fall later, because withdrawals lock in the loss. Many planners now model 3.5–4%.
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