What Is the 4% Rule?

Is it the best approach withdrawing from your retirement accounts?

By Motley Fool Retirement Team – Updated Dec 4, 2024 at 5:15 PM

Key Points

The 4% rule allows for withdrawing 4% of retirement savings annually, adjusting for inflation.
This rule is based on a portfolio split of 60% stocks and 40% bonds and stable spending.
Altering withdrawals based on market conditions and personal spending can be more effective.

The 4% rule is a common rule of thumb in retirement planning to help you avoid running out of money in retirement. It states that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without risking running out of money for at least 30 years.

It sounds great in theory, and it may work for some in practice. But there's no one right answer for everyone. And if you're blindly following this formula without considering whether it's right for your situation, you could end up either running out of money prematurely or being left with a financial surplus that you could have spent on things you enjoy.

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