Question 1

What is the Safe Withdrawal Rate (SWR)?

Accepted Answer

The Safe Withdrawal Rate (SWR) is the percentage of a retirement portfolio that can be withdrawn annually — adjusted for inflation each year — with a high historical probability of not depleting the portfolio over a 30-year retirement. The most famous research is the Trinity Study (1998), which found that a 4% initial withdrawal rate had near-100% historical success over 30 years for a balanced stock/bond portfolio. This is commonly called the '4% Rule'.

Question 2

What is the 4% rule for retirement?

Accepted Answer

The 4% rule states that retirees can withdraw 4% of their investment portfolio in the first year of retirement, then adjust that dollar amount for inflation each subsequent year, and historically have had a very high probability (95%+) of not running out of money over 30 years. To calculate your retirement target: Nest Egg = Annual Expenses / 0.04. For example, if you need $40,000/year, you need a $1,000,000 nest egg.

Question 3

Is the 4% rule still valid in 2025–2026?

Accepted Answer

The 4% rule was based on US historical market data. With lower expected future returns (due to high valuations), some researchers suggest a 3–3.5% withdrawal rate for early retirees with 40+ year time horizons. However, tactical strategies like GEM, which reduce drawdowns through momentum-based rotation, have historically supported higher SWRs by avoiding the worst bear market periods. Use StrategyIndex.io's FIRE Calculator to model different SWR scenarios.

Question 4

How do I calculate my FIRE number?

Accepted Answer

Your FIRE (Financial Independence, Retire Early) number is calculated using your target annual expenses divided by your chosen safe withdrawal rate. Formula: FIRE Number = Annual Expenses / SWR. With a 4% SWR, multiply your annual expenses by 25. With a 3.5% SWR, multiply by ~28.6. StrategyIndex.io's FIRE Calculator lets you model CoastFIRE, LeanFIRE, and FatFIRE milestones based on custom savings rates and SWRs.