A safe withdrawal rate is the share of a retirement portfolio you can spend in the first year, then raise each year for inflation, with little chance of running out; the best-known figure is 4%.
The 4% rule comes from William Bengen's 1994 article in the Journal of Financial Planning. Using US stock and bond returns from 1926 on, he found that withdrawing 4% of the starting balance, then adjusting that dollar amount for inflation each year, never exhausted a half-stock, half-bond portfolio in under 33 years. On $1 million, that is $40,000 in the first year.
It is a rule of thumb, not a guarantee. It was built for a retirement of about 30 years, on US market history, with a fixed spending path. A longer retirement argues for less. Advisory and fund fees come out of the same returns, so they reduce what you can safely spend.
Many planners now use flexible rules instead, such as trimming withdrawals after a market decline, which can support a higher starting rate.
How to check
Divide your planned first-year withdrawal by your portfolio balance. Social Security's life expectancy calculator helps estimate how many years the money needs to last; plan beyond the average, since many people outlive it.
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