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FI/RE 4% Rule Formula:
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The FI/RE (Financial Independence/Retire Early) 4% Rule is a guideline for sustainable retirement withdrawals. It suggests that you can withdraw 4% of your initial retirement portfolio each year, adjusted for inflation, with a high probability of your money lasting 30 years.
The calculator uses the 4% Rule formula:
Where:
Explanation: This calculation provides your safe annual withdrawal amount based on the 4% rule principle for long-term portfolio sustainability.
Details: The 4% rule helps individuals plan for financial independence and retirement by providing a sustainable withdrawal strategy that balances current spending needs with long-term portfolio preservation.
Tips: Enter your total portfolio value in your local currency. The calculator will compute your safe annual withdrawal amount based on the 4% rule.
Q1: Is the 4% rule guaranteed to work?
A: The 4% rule is based on historical market data and has a high success rate over 30-year periods, but it's not a guarantee. Market conditions and individual circumstances may vary.
Q2: Should I adjust for inflation?
A: Yes, the traditional 4% rule includes annual inflation adjustments to maintain purchasing power throughout retirement.
Q3: Does this work for early retirement?
A: For retirement periods longer than 30 years, a lower withdrawal rate (3-3.5%) may be more appropriate to ensure portfolio longevity.
Q4: What type of portfolio works best with the 4% rule?
A: The rule was originally tested with a 60% stock/40% bond portfolio, but various asset allocations can work depending on risk tolerance.
Q5: Are there limitations to the 4% rule?
A: The rule assumes average market returns and may not account for sequence of returns risk, high fees, or significant market downturns early in retirement.