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The 4% Rule (Trinity Study)

Withdraw 4% of your initial portfolio in Year 1, then adjust that dollar amount for inflation each year.

How It Works​

The 4% Rule is the most widely cited retirement withdrawal strategy. It comes from the 1998 Trinity Study, which found that withdrawing 4% of your starting portfolio (adjusted annually for inflation) survived 30-year periods in nearly all historical scenarios.

Your withdrawal amount is set once — in your first year of retirement — based on 4% of your portfolio value. After that, you simply adjust for inflation regardless of what markets do. If you start with $1,000,000, you withdraw $40,000 in Year 1, then $40,800 if inflation is 2%, and so on.

The simplicity is the appeal: you never have to recalculate or react to market swings. The risk is that a severe early downturn (sequence-of-returns risk) can deplete the portfolio before the inflation-adjusted withdrawals finish.

The Formula​

Year 1:

withdrawal = initialPortfolio × 0.04

Year 2+:

withdrawal = previousWithdrawal × (1 + inflationRate)

Key parameters:

  • Initial rate: 4% (configurable in SafeWithdrawls)
  • Inflation adjustment: Applied annually to the dollar amount, not the portfolio

Pros & Cons​

Advantages:

  • Extremely simple to understand and implement
  • Strong historical success rate over 30-year periods
  • Predictable, inflation-adjusted income stream
  • Well-researched with decades of backtesting data

Limitations:

  • Ignores current portfolio value after Year 1
  • Vulnerable to sequence-of-returns risk (bad early years)
  • Based on US historical data — may not apply globally
  • Fixed approach can't adapt to changing circumstances
  • 30-year horizon may be too short for early retirees

Example​

Starting portfolio: $1,000,000 | Inflation: 2.5%/year

YearPortfolio (start)WithdrawalNotes
1$1,000,000$40,0004% of initial
2$1,030,000$41,000Adjusted for 2.5% inflation
5$1,085,000$44,100Same inflation track regardless of portfolio
10$980,000$48,900Still inflation-adjusted even if portfolio dips

When to Use This Method​

The 4% Rule works best for retirees who:

  • Want a simple, set-it-and-forget-it approach
  • Have a 30-year retirement horizon
  • Are comfortable with a fixed spending pattern
  • Have other income sources (Social Security, pension) as a backup

Consider a dynamic method instead if you have a longer horizon, want to spend more when markets are good, or are concerned about severe early downturns.

Try It Yourself

Compare the 4% Rule against other strategies using your own numbers in the Scenario Builder.

References​