The 4% rule is a retirement planning guideline that suggests you can safely withdraw 4% of your retirement portfolio in the first year, then adjust that amount for inflation each subsequent year, with a high probability the money will last 30+ years.

Created from the Trinity Study (1998), which analyzed historical stock and bond returns from 1926-1995. The study found that a 4% initial withdrawal rate with a portfolio of 50-75% stocks had a 95% success rate over 30-year periods.

Example: With $1,000,000 portfolio, withdraw $40,000 in year 1. If inflation is 3%, withdraw $41,200 in year 2, $42,436 in year 3, and so on.

Many financial experts now suggest 3-3.5% may be more appropriate due to:

• •Lower Expected Returns: Bond yields and stock valuations suggest lower future returns
• •Longer Retirements: People are retiring earlier and living longer
• •Sequence Risk: Early market crashes can permanently damage portfolio
• •Healthcare Costs: Medical expenses rising faster than general inflation

Recommendation: Use 4% as a baseline but consider 3-3.5% for early retirement or conservative planning. Adjust based on market conditions and personal flexibility.