4% Rule in Retirement Withdrawals: Guidelines for Investors

The 4% rule recommends withdrawing 4% of your IRA or 401(k) balance in the first year of retirement. For instance, with a $2 million retirement balance, an initial withdrawal would be $80,000. Withdrawals can be adjusted for inflation, allowing for increased amounts in following years. While the rule has faced criticism for being too conservative or risky, it can offer a baseline for retirement planning. Understanding this rule is crucial for ordinary investors planning for sustainable retirement income.