# The 4% Rule

`Here’s a formula to help insure that your retirement savings last as long as you do!`

Many studies indicate that if you want your retirement savings to last, you should withdraw no more than 4% to 6% of your savings each year. The exact percentage depends on many factors, including how long you live and how much you income you receive from part-time work, social security, etc.

Let’s use an example. Jose wants \$80,000 in annual income during retirement. He has a pension and social security benefits totaling \$30,000 a year. To earn the remaining \$50,000 a year on his investments, he needs a portfolio of at least \$1.25 million dollars by the time he retires. That’s because \$50,000 is 4% of \$1.25 million.

If someone has \$100,000 in savings and withdraws 4% a year, that’s just \$4,000 a year. With \$1,000,000 dollars in savings (at the same 4% withdrawal rate) the amount grows to \$40,000 a year … which sounds like a much nicer retirement!

Note: Here’s another way to look at it: Assuming a withdrawal rate of 4%, for every dollar you want to withdraw annually during retirement, you need to have \$25 in assets set aside at the time you retire.

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