What is the 4% rule for retirement?

The 4% rule states that you can safely withdraw 4% of your retirement portfolio in the first year, then adjust for inflation each year after, and your money should last 30 years. It was developed from the Trinity Study (1998) based on historical US stock and bond returns. A conservative version uses 3.5% or 3% to account for lower expected future returns.

What average return should I use for retirement planning?

The US stock market (S&P 500) has returned approximately 10% per year historically before inflation, or about 7% after inflation. A diversified portfolio of 60% stocks and 40% bonds has returned about 8-9% before inflation historically. For conservative planning, many financial planners use 6-7% as the expected pre-inflation return.

How much should I contribute to my 401(k)?

At minimum, contribute enough to get your employer's full match — that's an immediate 50-100% return. Beyond that, financial advisors generally recommend saving 10-15% of your gross income for retirement. The 2026 401(k) contribution limit is $23,500 per year ($31,000 if you're 50 or older with the catch-up contribution).

Retirement Calculator

Project your retirement savings with compound growth, contributions, and inflation adjustment.

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Quick Answer

The "4% rule" says you need 25× your annual expenses saved to retire. Spending $50,000/year means needing $1.25M. The S&P 500 has returned ~10%/year historically (about 7% after inflation). Start early — at 7%, money doubles roughly every 10 years due to compound interest.

How retirement savings grow

Retirement savings grow through compound interest — you earn returns not just on your contributions but on previous returns. A $10,000 investment at 7% annual return becomes $19,672 after 10 years, $38,697 after 20 years, and $76,123 after 30 years, without any additional contributions. Add regular monthly contributions and the growth becomes dramatically larger.

The 4% rule

Developed from the Trinity Study (1998), the 4% rule suggests withdrawing 4% of your portfolio in year one of retirement, then adjusting for inflation each year. At this rate, a diversified portfolio historically lasted 30 years or more in virtually all historical scenarios. To use it: divide your desired annual income by 0.04. $60,000/year income requires $1.5 million saved.

2026 contribution limits

The 401(k) contribution limit for 2026 is $23,500 ($31,000 if you're 50+, with the $7,500 catch-up contribution). The IRA limit is $7,000 ($8,000 if 50+). Always contribute at least enough to get your full employer 401(k) match — that's an immediate 100% return on that portion. A Roth IRA grows tax-free; a traditional IRA or 401(k) is tax-deferred.

Note: This calculator shows projections only. Actual returns vary. Past market performance does not guarantee future results. For personalised retirement planning, consult a certified financial planner (CFP).

Frequently asked questions

How much do I need to retire?

Multiply your expected annual expenses by 25 (the 4% rule). If you spend $60,000/year, aim for $1.5 million. This assumes a 30-year retirement horizon and a diversified investment portfolio.

What is the 4% rule?

The 4% rule states you can withdraw 4% of your portfolio in year one, then adjust for inflation, and your money should last 30 years. It comes from historical US stock and bond return data (Trinity Study, 1998).

What return rate should I use?

The S&P 500 has averaged ~10%/year historically. After 2.5% inflation, the real return is ~7.5%. For a balanced portfolio (60% stocks, 40% bonds), 6-7% is a reasonable planning assumption.

How much should I put in my 401(k)?

At minimum, contribute enough to get your employer's full match. Beyond that, aim for 10-15% of gross income. The 2026 limit is $23,500 ($31,000 if 50 or older).