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Withdrawal Calculation:
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The retirement withdrawal calculation determines how much money you can safely withdraw from your retirement portfolio each year without running out of funds. The 4% rule is a common guideline suggesting you withdraw 4% of your portfolio in the first year of retirement, adjusting for inflation thereafter.
The calculator uses the simple withdrawal formula:
Where:
Explanation: The calculation multiplies your total portfolio value by your chosen withdrawal rate (expressed as a percentage) to determine your annual withdrawal amount.
Details: Choosing an appropriate withdrawal rate is crucial for retirement planning. Too high a rate may deplete your savings prematurely, while too low may unnecessarily restrict your spending.
Tips: Enter your total retirement portfolio value in USD and your desired annual withdrawal rate as a percentage. Both values must be positive numbers.
Q1: What is the 4% rule?
A: The 4% rule suggests withdrawing 4% of your retirement portfolio in the first year, then adjusting that amount annually for inflation. This strategy was designed to make savings last 30 years.
Q2: Is 4% withdrawal rate safe for everyone?
A: Not necessarily. The appropriate rate depends on your portfolio composition, retirement duration, and market conditions. Some experts now recommend starting with 3-3.5%.
Q3: Should I adjust withdrawals based on market performance?
A: Many financial planners recommend flexible withdrawal strategies that adjust based on portfolio performance to reduce sequence-of-returns risk.
Q4: Does this account for taxes?
A: No, this is a pre-tax calculation. Your actual spendable amount may be less depending on your tax situation.
Q5: What about other income sources?
A: This calculator only considers portfolio withdrawals. You should also account for Social Security, pensions, and other income sources in your overall retirement plan.