4% Rule

The 4% rule is a retirement planning guideline that states you can safely withdraw 4% of your portfolio in the first year of retirement, then adjust that amount annually for inflation, and your portfolio is likely to last at least 30 years.

The rule originated from the 1998 Trinity Study by three finance professors at Trinity University. They analyzed historical US stock and bond market data from 1926 to 1995 and found that a portfolio allocated 50-75% to stocks had a 95%+ survival rate over 30 years at a 4% initial withdrawal rate.

For early retirees with longer time horizons (40-50+ years), many experts recommend a more conservative 3-3.5% withdrawal rate. The inverse of the 4% rule gives you the FIRE number multiplier: 1 ÷ 0.04 = 25, meaning you need 25 times your annual expenses to retire.