The 4% rule: how much you need to retire early

The 4% rule is the best-known answer to how much you need to live off your investments. In the first year you take out 4% of what you have saved. After that you take the same amount each year, raised by inflation, whatever the markets do.

It boils down to simple arithmetic: you need 25 times your yearly spending.

Where the rule comes from

The rule rests on the history of the US market. In 1994 the financial planner William Bengen tested which withdrawal would have lasted 30 years in every historical period. In 1998 three professors at Trinity University (Cooley, Hubbard and Walz) worked out the success rates of different withdrawals for different mixes of stocks and bonds. That is where the idea comes from that 4% "almost always works".

How the rule holds up in the data since 1928

We ran the same test on the years 1928–2025: US stocks (the S&P 500 with dividends), 10-year Treasury bonds and US inflation. The portfolio goes back to its mix of stocks and bonds every January, and the money comes out at the start of each year. We tried all 69 thirty-year periods in the data, starting from 1928 to 1996.

With 75% in stocks, taking out 4% lasted 30 years in 94% of the periods. With half in stocks it was 93%, with all of it in stocks 93%.

Stocks / bonds	3%	3.5%	4%	4.5%	5%
100% / 0%	100%	99%	93%	90%	78%
75% / 25%	100%	100%	94%	87%	77%
50% / 50%	100%	100%	93%	83%	67%
25% / 75%	100%	97%	74%	54%	42%
0% / 100%	84%	48%	39%	33%	25%

Three things stand out:

• The rule doesn't work without stocks. A portfolio of bonds alone lasted at 4% in only 39% of the periods, with a quarter in stocks in 74%. After inflation, bonds have earned little over the long run.
• Half a percentage point matters a lot. With 75% in stocks, 3.5% lasted in 100% of the periods and 5% in only 77%.
• When you start matters. The worst start was 1966. From then on, the most you could have taken out with 75% in stocks was 3.8%, with half in stocks 3.7%.

Retiring early: 30 years is not enough

The 4% rule is about 30 years. If you want to stop working at 40 or 45, the money has to last longer. With 75% in stocks, 4% lasted 40 years in 90% of the historical periods and 50 years in only 80% (there are fewer fifty-year periods in the data; the last one starts in 1976). Taking out 3.5% lasted 50 years in 98% of them.

That is why the FIRE calculator lets you pick the historical certainty you want instead of a fixed percentage, and works out what you need for the length of retirement you choose.

What not to forget

• Fees. The rule assumes the market return with no costs. With a 1% yearly fee, 4% with 75% in stocks lasted in only 87% of the thirty-year periods (at 0.5% in 94%). A cheap index fund is worth a lot here.
• Taxes. The rule works with what you take out of the portfolio. What reaches your account depends on the kind of account and on taxes, so plan with the amount after tax.
• Social Security and other income. Once you start receiving Social Security or a pension, you need less from the portfolio. The FIRE calculator can count it, and part-time work too.
• History is no guarantee. The results show what would have happened in the past on one market. The future can be worse or better.

The 4% rule is a good start for a rough estimate. For your own plan, work out the numbers that fit you: spending, savings, age and the share of stocks.

See also: How much do you need to retire early? · A 0.2% or a 1.5% fund fee