What is the 4% rule?
The 4% rule is a retirement planning guideline that says you can safely withdraw 4% of your portfolio each year without running out of money over a 30-year retirement. This means your target pot is 25× your annual spending (because 1 ÷ 0.04 = 25).
For example: if you want to spend £30,000 per year, the 4% rule suggests you need a pot of £750,000.
Where did it come from?
The rule comes from the Trinity Study (1998), which analysed historical US stock and bond market returns from 1926–1995. It found that a 4% initial withdrawal rate, adjusted for inflation each year, had a very high success rate over a 30-year period.
Does it work in the UK?
The evidence is more mixed for UK investors:
- UK equity returns have historically been lower than US returns
- Sequence of returns risk is real — a market crash in your first few years of retirement can significantly harm your long-term outcomes
- A 30-year horizon may not be long enough if you retire early or live into your 90s
- State pension changes the picture — once it kicks in at 67, you need much less from your pot
What does our calculator use instead?
Rather than applying a fixed multiple, our calculator runs a year-by-year drawdown simulation tailored to your situation:
- We start with your desired annual income in today’s money
- We account for state pension reducing your pot withdrawals from age 67
- We grow and draw down the pot year by year to your planned lifespan
- We find the exact pot size that reaches zero at your target age
This typically produces a lower required pot than the blanket 4% rule suggests — because the state pension does a lot of heavy lifting from age 67.
A safer withdrawal rate for UK investors?
Many UK financial planners suggest being conservative and using a 3.5% withdrawal rate (28.6× spending) to account for:
- Lower expected UK equity returns
- Longer life expectancies
- Sequence of returns risk in early retirement
If you retire before 57 and won’t access your pension until then, you’ll need to bridge from a cash or ISA pot — which may justify an even more conservative rate for the early years.
The bottom line
The 4% rule is a useful starting point, but it’s not designed for UK investors with state pensions, ISA/SIPP tax structures, and potentially 40+ year retirements. Use our calculator to get a figure tailored to your specific age, income target, and retirement timeline.