How it works
The 4% rule is a popular rule of thumb for estimating how much you can withdraw from a portfolio each year without running out too early.
Annual income = Savings × Withdrawal rate
What the 4% rule really means
The rule suggests withdrawing about 4 percent of your portfolio in the first year, then adjusting for inflation each year after. It is a starting guideline, not a guarantee.
Why it may not fit everyone
The 4% rule assumes a long retirement and a diversified portfolio. Your personal rate may be lower or higher depending on your spending, health, and market conditions.