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The 4% Rule in Plain Numbers: What $600,000 Pays in Retirement

By Smart Budget Sheets November 10, 2026
The 4% rule: where it comes from, what $600k pays, and the caveats.

The 4% rule is a starting point for how much you might withdraw from savings each year in retirement. It is useful, as long as you know where it came from and what it assumes.

How it works

  • Year one: withdraw 4% of the portfolio.
  • Each later year: take the same dollar amount, adjusted for inflation, whatever the market did.

$600,000 x 4% = $24,000 in year one, about $2,000 a month. If inflation is 3%, year two is $24,720.

Where the number comes from

It comes from research in the 1990s (William Bengen, then the ‘Trinity study’) on historical US stock and bond returns. A roughly 4% starting withdrawal survived 30-year retirements in almost all historical periods tested, with a mostly stock and bond mix.

Working backwards

Yearly spending from savings x 25 gives a rough target, because 1 / 0.04 = 25.

  • $30,000 a year from savings: about $750,000.
  • $40,000 a year: about $1,000,000.

Subtract income you will get anyway (Social Security, a pension) before multiplying.

Caveats

  • Retiring early means more than 30 years; many people use 3-3.5% for longer horizons.
  • Fees reduce what you can safely take.
  • Taxes depend on the account type: traditional accounts are taxed on withdrawal, Roth generally not.
  • Being flexible helps a lot: spending a little less after bad market years makes the plan much more robust.

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General information, not financial advice. Figures are rounded examples.

#personalfinance #budgeting #retirement
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