How much can a nest egg safely pay you — and how big does it need to be? Enter your portfolio value and a withdrawal rate to get the first-year annual and monthly withdrawal, or enter your desired yearly spending to see the portfolio required (the 25x rule).
Answer first: under the classic 4% rule, a retiree withdraws 4% of their portfolio in the first year and then raises that dollar amount with inflation every year afterwards. This 4% rule calculator shows the first-year annual and monthly income for any portfolio and any withdrawal rate — and runs the math backwards, turning a spending target into the nest egg it implies.
First-year withdrawal = Portfolio × Rate · Nest egg needed = Spending ÷ Rate
Example: $1,000,000 × 4% = $40,000 per year (≈ $3,333/month). Flip it: to spend $40,000 a year you need $40,000 ÷ 0.04 = $1,000,000 — the familiar 25x rule.
The rule comes from financial planner William Bengen's 1994 research, later reinforced by the "Trinity study" (Cooley, Hubbard and Walz, 1998). Both asked a simple question of history: what starting withdrawal rate would have survived every 30-year retirement in U.S. market data, including those that began right before the 1929 crash or the brutal 1966–1982 stretch? For a portfolio of roughly half stocks and half intermediate government bonds, the answer landed near 4% — hence the name.
The back-tests assume a diversified stock/bond mix (Bengen used 50–75% stocks), a roughly 30-year retirement, withdrawals raised by inflation each year regardless of market performance, and — crucially — U.S. historical returns, which were among the world's best. Fees and taxes are largely ignored. Change any of these and the "safe" rate changes with it: a 40-year early retirement, high fund fees or a lower-return future all argue for a smaller number, which is why many planners today model 3–4% instead and keep spending flexible.
Averages lie to retirees. Two portfolios can earn the same average return over 30 years, yet the one that hits a bear market in years one and two — while withdrawals are being taken — can run dry, because shares sold cheap never recover. This is sequence-of-returns risk, and it's the entire reason the safe rate is ~4% rather than the market's long-run average of 7%+. Practical defenses include keeping a cash/bond buffer, skipping inflation raises after down years, or using a flexible "guardrails" approach that trims spending when the portfolio falls behind.
Try rates between 3% and 5% and watch both directions move: at 3.5%, a $1M portfolio pays $35,000 and a $40,000 lifestyle needs about $1.14M (a 28.6x multiple); at 5%, the same portfolio pays $50,000 but the historical failure risk rises meaningfully. The "multiple of spending" stat shows how many years of spending your portfolio represents at the chosen rate — the mirror image of the withdrawal percentage.
Reality check: the 4% rule is a historical rule of thumb, not a guarantee — past U.S. returns may not repeat, and taxes, fees, pensions and Social Security all change the picture. This is an educational calculator, not financial advice or a retirement plan. For unbiased basics see the U.S. SEC at investor.gov.
Build the nest egg first with the retirement savings calculator, sanity-check growth with the compound interest calculator, keep withdrawals honest with the real rate of return calculator, and compare account types in what is a Roth IRA? and Roth vs Traditional IRA.
Last updated July 2, 2026 · Written by Mustafa Bilgic. Educational only — not financial advice.
The 4% rule is a retirement guideline: withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year. In historical U.S. back-tests by William Bengen and the Trinity study, a diversified stock/bond portfolio survived at least 30 years of such withdrawals in every period studied.
It is the 4% rule flipped around: to support a given level of annual spending, you need roughly 25 times that amount invested (100 ÷ 4 = 25). Spending $40,000 a year implies a target portfolio of about $1,000,000. At a 3.5% withdrawal rate the multiple becomes about 28.6x.
No. It is a rule of thumb based on past U.S. market history, not a guarantee. Poor early-retirement returns (sequence-of-returns risk), longer lifespans, fees and taxes can all break it. Many planners model 3–4% and adjust spending flexibly rather than treating any single rate as fixed.
Under the classic rule, yes. You compute 4% only once — in year one — and thereafter raise the dollar withdrawal by inflation, regardless of what the portfolio does. That is what the historical success rates were measured on.