What Is the 4% Rule (and Why It Decides When You Can Quit)

The One Rule That Decides Your Freedom

Every financial independence calculation starts with the same question: "How much do I need?" The answer comes from one study, one rule, and one simple formula.

The 4% rule says that if you withdraw 4% of your investment portfolio in your first year of retirement, then adjust that amount for inflation each year after, your money has a very high probability of lasting at least 30 years.

In practical terms: multiply your annual expenses by 25, and that's your Quit Number.

Where the 4% Rule Comes From

In 1998, three finance professors at Trinity University in San Antonio, Texas published a paper that changed the retirement planning world. They analyzed every 30-year period in the U.S. stock market going back to 1926 and asked: "What withdrawal rate would have survived?"

The answer was remarkably consistent. A portfolio of 50% stocks and 50% bonds, with a 4% initial withdrawal rate, survived in about 95% of all historical 30-year periods. This became known as the "Trinity Study," and the 4% number became the gold standard for retirement planning.

The 25x Formula

The math is straightforward. If you withdraw 4% of your portfolio each year, you need 25 times your annual expenses invested (because 1 / 0.04 = 25).

Here's what that looks like at different spending levels:

Monthly Expenses to Quit Number

• $3,000/month ($36,000/year) → Quit Number: $900,000
• $4,000/month ($48,000/year) → Quit Number: $1,200,000
• $5,000/month ($60,000/year) → Quit Number: $1,500,000
• $7,000/month ($84,000/year) → Quit Number: $2,100,000
• $10,000/month ($120,000/year) → Quit Number: $3,000,000

Two Levers You Can Pull

Notice that your Quit Number depends entirely on your expenses, not your income. This means you have two levers to pull:

1. Reduce expenses. Every $100 per month you cut from your spending reduces your Quit Number by $30,000 and accelerates your timeline by months or even years.

2. Increase income. Earning more doesn't change your Quit Number, but it increases how fast you get there by boosting your savings rate.

The most powerful combination is doing both: earn more and spend less. That widens the gap and compresses your timeline dramatically.

When the 4% Rule Doesn't Apply

The 4% rule has limitations worth understanding:

• It assumes 30 years. If you're retiring at 35, you might need your money to last 50-60 years. Some people use a 3.5% or 3% rate for extra safety.
• It's based on U.S. historical data. Future returns might differ from the past.
• It doesn't account for flexibility. Most early retirees can cut spending or earn side income if markets crash, which dramatically improves survival rates.

That said, the 4% rule remains the best starting point we have. It gives you a target to aim for, and you can adjust from there.

Calculate Your Number Right Now

Stop guessing. Use our calculator to find your exact Quit Number, see your Quit Score (how close you are), and get your projected Quit Date. It takes 60 seconds.

The 4% rule gives you the formula. Your numbers tell the story.