Taking advantage of the 4% Rule

The 4% Rule is a quick estimate of a safe withdrawal rate for retirement, given reasonable long term returns. There are many variables which can make this value conservative or aggressive, but it’s a good starting point. It also provides an interesting layer for the Stairway of Spending:

4% Increments

I prefer to look at it as “Required Investment” = 25 x “Desired Expenses”. For every $5,000/year of expenses, I’d need another $125,000 saved. Depending on your savings rate, $125K can significantly delay goals:

Saving to 125K

Keep in mind, this doesn’t include compounding, which makes it easier to go from $500K to $750K, than $250K to $500K. I excluded it to keep the chart useful for those steadily shifting to investment income. For example, I might choose to reduce work hours, spending a portion of my investments to make up for the lost revenue. Rather than locking in expenses, I could set a fixed savings rate, spending all but $25,000 of all income. My expenses could increase steadily each year, and/or I could work slightly less.

I’ll close with a list of factors to consider how conservative or aggressive the 4% Rule might be in your context:


  • Market beating investments
  • Strong market early in withdrawal phase
  • Government benefits
  • Flexible spending
  • Flexible work hours
  • Downward trending costs


  • Market failing investments
  • Weak market early in withdrawal phase
  • Fraud
  • Hackers
  • Health crisis
  • Natural disaster
  • Unnatural disaster
  • Inflexible spending

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