Safe Withdrawal Rate
The percentage of a retirement portfolio you can withdraw each year with a low risk of running out of money.
A safe withdrawal rate estimates how much can be drawn from a retirement portfolio annually — adjusted for inflation — without a high risk of depleting it over a multi-decade retirement. The commonly cited 4% figure comes from historical market analysis, but it's sensitive to market conditions at the start of retirement and isn't a guarantee.
Worked Example
A $1,000,000 portfolio at a 4% withdrawal rate suggests around $40,000 in the first year of retirement, adjusted upward for inflation in subsequent years.
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