What the 4% convention means
In the convention used here, you withdraw 4% of the starting portfolio in the first year, then adjust that dollar amount for inflation in later years. You do not recalculate 4% of the current balance each year. Fidelity describes this starting-percentage approach in its retirement-withdrawal guidance, cited below.
A $600,000 illustration
Four percent of $600,000 is $24,000 in year one, equivalent to $2,000 per month. If you assume 2.5% inflation for the next year, multiplying $24,000 by 1.025 gives a $24,600 second-year withdrawal. The 2.5% is a hypothetical input, not an inflation forecast.
Where “25 times spending” comes from
Illustrative portfolio target = annual portfolio withdrawal ÷ 0.04 = withdrawal × 25
If the amount you want the portfolio to fund is $40,000 per year, the arithmetic target at 4% is $1,000,000. Use the spending that the portfolio must fund, rather than automatically using all household spending.
What this shortcut cannot answer
A starting percentage alone does not describe the investments, sequence of returns, retirement length, fees, taxes, or willingness to change spending. This page does not attach a success probability to 4% or recommend it for a particular person.
The withdrawal calculator lets you solve for an amount over a chosen duration. The depletion calculator shows the timeline under your own constant-return assumptions. Both remain simplified models.
Compare fixed-dollar and changing-percentage approaches in retirement withdrawal strategies. The safe-withdrawal-rate guide explains why a constant-return calculation cannot establish a safe personal rate.
Questions about this calculation
Is it 4% of the starting balance or the current balance?
The convention explained here takes 4% of the starting portfolio in the first year, then adjusts that dollar amount for inflation. Taking 4% of the current balance every year is a different spending rule.
Does 4% guarantee that my money will last?
No. This mini calculator only multiplies your balance by 4%. It does not estimate longevity, simulate market returns, or calculate a probability of success.
Why does the rule imply a target of 25 times spending?
Dividing an annual withdrawal by 0.04 is the same as multiplying by 25. It is an algebraic relationship, not proof that the resulting balance is sufficient for your retirement.
Source and review date
As of October 25, 2026: Fidelity, “How can I make my savings last?” (May 26, 2026) describes taking a starting percentage of savings and adjusting that amount for inflation. This page uses only the 4% arithmetic convention and makes no claim about historical success.
Examples calculated using the formulas above; see our methodology.