Balance at
Retirement
Annual Employer
Match
Annual Tax
Savings
Understanding the 4% Rule
The "4% rule" is a guideline for how much you can withdraw from your retirement savings each year while minimizing the risk running out of money too soon:
- In your first year of retirement, you withdraw 4% of your total investment portfolio.
- After that, you keep withdrawing the same dollar amount each year, but adjusted for inflation.
For example, if you retire with $1,000,000, you would withdraw $40,000 in year one. If inflation is 3%, you would withdraw $41,200 in year two, and so on.
This rule comes from historical studies of stock and bond returns, which found that a 4% starting withdrawal, invested in a diversified portfolio, usually lasted for at least 30 years. However, it's only a rule of thumb, not a guarantee.
Many planners now treat 4% as a starting point: you might choose a lower rate if you want to be more conservative.
Savings Milestones
Based on you inputs, here's where you're predicted to reach major savings milestones.
Achievement |
Age |
Year |
Your Contributions |
|---|
Purchasing Power
Money tends to lose value over time. Here's the purchasing power in today's dollars of your estimated 401(k) savings at a variety of annual average inflation rates between now and your retirement date.
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