The Safe Withdrawal Rate (SWR) is the percentage of your retirement portfolio you can withdraw annually without running out of money. It accounts for inflation by adjusting withdrawals each year. The most famous SWR is 4%, derived from the Trinity Study, which found that a 4% initial withdrawal rate had a 95%+ success rate over 30-year periods historically. The concept was pioneered by William Bengen in 1994 and later validated by the 1998 Trinity Study conducted by professors at Trinity University.

The 4% Rule states that if you withdraw 4% of your portfolio in the first year of retirement and adjust that amount for inflation each subsequent year, you have a very high probability of not running out of money for 30 years. It became famous after William Bengen's 1994 research and the 1998 Trinity Study. It's a simple, actionable guideline that has stood the test of historical market conditions including the Great Depression, 1970s stagflation, and 2008 financial crisis.

Inflation erodes purchasing power over time. If you withdraw a fixed dollar amount, you'll be able to buy less each year. The SWR approach adjusts your withdrawal amount upward each year to match inflation. For example, if you withdraw $40,000 in Year 1 and inflation is 3%, you'd withdraw $41,200 in Year 2. This maintains your lifestyle but accelerates portfolio depletion, which is why the initial rate matters so much.

FIRE is a movement focused on aggressive saving and investing to achieve financial independence decades before traditional retirement age (55-65). The goal is to accumulate enough wealth that investment returns cover living expenses indefinitely. Your 'FIRE Number' is typically calculated as Annual Expenses × 25 (based on the 4% rule). Once you reach this number, you can theoretically retire and live off your portfolio using the SWR method.

Sequence of returns risk refers to the danger that the order of investment returns matters, not just the average. If you experience poor returns early in retirement while making withdrawals, your portfolio may never recover—even if average returns are good. A market crash in Year 1 is far worse than the same crash in Year 20 because you're selling assets at low prices. This is why even with good average returns, some retirees run out of money while others leave large inheritances.

The 4% rule was based on historical US market data from 1926-1995 including stocks and bonds. Current concerns include: (1) Lower expected bond yields than historical averages (10-year Treasury was often 4-6% historically vs 3-4% now), (2) Higher equity valuations (CAPE ratio above historical averages), (3) Longer life expectancies requiring 40+ year retirements. Many financial advisors now recommend 3-3.5% for early retirees or those wanting extra safety margin. Our calculator shows recommended rates based on your planned retirement duration.

Your FIRE number is calculated by dividing your annual expenses by your target withdrawal rate. Using the 4% rule: FIRE Number = Annual Expenses ÷ 0.04, or simply Annual Expenses × 25. For example, if you need $50,000/year, your FIRE number is $1.25 million. For a more conservative 3.5% rate, multiply expenses by 28.57. For 3%, multiply by 33.33. Use our FIRE Target mode to calculate this automatically based on your desired monthly income.

There are four main withdrawal strategies: (1) Fixed Percentage: Withdraw same % every year—never depletes but income varies. (2) Constant Dollar: Fixed amount adjusted for inflation—predictable income but can deplete. (3) Variable Percentage: Adjust rate based on market performance—adaptive but complex. (4) Guardrails Strategy: Cut or raise spending when portfolio hits certain thresholds—balanced and disciplined. The best strategy depends on your flexibility, income needs, and risk tolerance. Our calculator includes a comparison table to help you decide.

For early retirees targeting 40-50 year retirements, the 4% rule becomes riskier. Historical data shows success rates drop for longer periods. Recommendations for early retirees include: (1) Use 3-3.5% withdrawal rate, (2) Maintain flexibility to reduce spending 10-20% in down markets, (3) Have backup income sources like part-time work, rental income, or Social Security later, (4) Consider variable withdrawal strategies that adapt to market conditions. Our calculator recommends appropriate rates based on your duration.

This calculator uses a constant return assumption (your input rate) rather than simulating volatile year-by-year returns. This provides a baseline scenario for planning. Real-world returns vary dramatically year to year. The 'Success Score' gauge incorporates your withdrawal rate vs return spread to estimate risk. For comprehensive planning, we recommend: (1) Running multiple scenarios with different assumptions (use our save feature), (2) Testing pessimistic scenarios (lower returns, higher inflation), (3) Consulting a financial advisor for personalized advice.