Rule of thumb · FinanceNº 61 / 167

The 4% rule

A retirement pot can sustain withdrawals of about 4% a year — so you need roughly 25× your annual spending.

Why it works

From the Trinity study of historical US portfolios. A guideline, not a guarantee: sequence-of-returns risk and long retirements argue for flexibility.

When it fails

It came from 30-year US retirements in a specific historical window. Retire at 50 and you need the pot to last 45 years, where the same withdrawal has failed in back-tests. A poor first decade does the damage: sequence of returns, not average returns, is what empties the account.

Do it exactly

Estimate with the rule, then check it against the calculator that models it properly.

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How much can you safely withdraw from savings in retirement?

A retirement pot can sustain withdrawals of about 4% a year — so you need roughly 25× your annual spending. From the Trinity study of historical US portfolios.

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