The 4% Rule Explained: How Much Money Do You Need to Retire Safely?

How much money must you accumulate before you can comfortably quit your job and retire without running out of cash?

The 4% Rule—originating from the famous Trinity Study—provides a mathematically proven benchmark for calculating your target retirement nest egg.

How the 4% Rule Works

The 4% rule states that if you withdraw 4% of your total investment portfolio during your first year of retirement (and adjust that dollar amount for inflation in subsequent years), your portfolio has a 95% probability of lasting at least 30 years.

Target Retirement Corpus = Annual Living Expenses × 25

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Calculating Your Retirement Number

If your household requires $60,000 per year to cover living expenses:

Target Nest Egg = $60,000 × 25 = $1,500,000

In Year 1 of retirement, you withdraw $60,000 ($1.5M x 4%). If inflation is 3% in Year 2, you withdraw $61,800.

Model your retirement horizon and monthly savings goals on our free Retirement Planner.

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Adjusting the 4% Rule for Early Retirees (FIRE Movement)

If you plan to retire in your 30s or 40s (aiming for a 50-year retirement horizon), financial planners recommend adopting a safer 3.25% to 3.5% withdrawal rate (requiring 28x to 30x annual expenses).

Calculate your exact retirement savings timeline on our Retirement Planner today!