Safe Withdrawal Rate (SWR)

The safe withdrawal rate (SWR) is the percentage of a retirement portfolio that can be withdrawn annually without depleting the portfolio over a given time period. It represents the balance between taking enough income to live on while preserving enough capital to sustain withdrawals for decades.

The most commonly cited SWR is 4%, from the Trinity Study (1998). However, the appropriate SWR depends on several factors: retirement duration (longer = lower rate), portfolio allocation (more stocks generally supports higher rates), flexibility (ability to reduce spending in down markets), and supplemental income sources (Social Security, pension, part-time work).

For a 30-year retirement, 4% is historically well-supported. For 40-50 year retirements common in FIRE, 3-3.5% provides greater safety margins. The inverse of the SWR gives the FIRE number multiplier.