Investing glossary
The 4% rule
The 4% rule estimates you can withdraw 4% of your invested wealth in the first year of retirement (adjusting that amount for inflation in later years) with a low probability of running out of money over 30 years.
It comes from historical studies of US equity and bond portfolios (the most cited being the "Trinity Study"), and it is a rule of thumb, not a guarantee: it depends on the actual sequence of returns you happen to experience.
In practice, it is equivalent to needing roughly 25 times your annual spending to be able to live off your wealth following this rule.