The safe withdrawal rate is the percentage of a retirement portfolio you can withdraw each year, adjusted for inflation, without a high risk of running out of money over your lifetime. The best-known benchmark is the 4% rule, derived from historical US market data in the Trinity study.
Worked example
With a $1,000,000 portfolio and a 4% withdrawal rate, you could withdraw $40,000 in the first year, then adjust that amount for inflation each year thereafter.
Why it matters
The withdrawal rate determines how large a portfolio you need: at 4% you need 25× expenses; at 3% you need about 33×. Early retirees with multi-decade horizons often choose a lower rate for extra safety.
Frequently asked questions
It was based on US history, and global outcomes have varied. Many planners apply a more conservative rate or build in flexibility to spending to account for this.