4%
The 4% Rule Calculator

Methodology

Here is exactly how the calculator works

How It Works

The calculator uses the "Classic 4% Rule" from William Bengen's 1994 research.

  • Year 1: Withdraw 4% of your initial portfolio
  • Year 2+: Increase that dollar amount by each year's inflation
  • Withdrawals are annual (beginning of each year)
  • Remaining portfolio grows/shrinks with S&P 500 returns

Example

$1M portfolio → $40k Year 1 → if 3% inflation → $41,200 Year 2

Data Sources

S&P 500 returns & CPI inflation: Robert Shiller, Yale University

Includes monthly S&P 500 prices, dividends, and CPI from 1871–present. We use annual returns (January to January).

Shiller Data Website Download Dataset (ie_data.xls)

Assumptions

100% S&P 500

All money invested in S&P 500 (no bonds, no diversification).

No Taxes or Fees

Results are gross of fees and taxes.

Annual Withdrawals

Taken at the beginning of each year.

Dividends Reinvested

Returns include dividend reinvestment.