What is the 4% rule?
The Trinity Study finding behind the 25× rule and your FIRE number.
The 4% rule states that you can withdraw 4% of your investment portfolio each year in retirement and have a very high probability of never running out of money over a 30-year retirement. It was developed from the landmark 1998 Trinity Study conducted by three finance professors at Trinity University in Texas.
In practical terms, the 4% rule gives you the 25× rule: multiply your annual spending by 25 to get your target portfolio (your “FIRE number”). For example, if you spend €40,000 per year, you need €1,000,000 invested.
The formula
Both formulas are mathematically equivalent: 1 ÷ 4% = 25
Where does the 4% rule come from?
How three Trinity University professors stress-tested withdrawal rates against US market history back to 1926.
In 1998, professors Philip Cooley, Carl Hubbard, and Daniel Walz at Trinity University analyzed historical US stock and bond market data going back to 1926. They tested different portfolio allocations and withdrawal rates across every 30-year period in that dataset.
Their conclusion: a portfolio of 50–75% stocks and 25–50% bonds withdrawing 4% per year (inflation-adjusted) survived 95%+ of all historical 30-year periods — including the Great Depression, the 1970s stagflation, and the dot-com crash.
The study has been updated multiple times since 1998 and the 4% finding has held up across different time periods and markets, though the original research used US market data only.
Calculating your FIRE number with the 4% rule
Multiply annual spending by 25 — and what that looks like at different lifestyles.
| Annual spending | FIRE number (25×) | FIRE type |
|---|---|---|
| €25,000 | €625,000 | Lean FIRE |
| €40,000 | €1,000,000 | FIRE |
| €60,000 | €1,500,000 | FIRE |
| €100,000 | €2,500,000 | Fat FIRE |
| €200,000 | €5,000,000 | Fat FIRE |
Use our FIRE Calculator to find your exact number based on your current savings, monthly contributions, asset allocation, and inflation assumptions.
Is the 4% rule still valid in 2026?
Yes — with caveats for early retirees facing 40–50 year horizons.
The 4% rule was designed for 30-year retirements. If you retire at 40 and live to 90, you have a 50-year retirement, which increases sequence-of-returns risk significantly.
Many financial planners and FIRE researchers (including Big ERN's Safe Withdrawal Rate series) recommend 3.3%–3.5% for early retirees with 40–50 year horizons. This means multiplying annual spending by 28–30 rather than 25.
The key insight: the 4% rule is a guideline, not a guarantee. Building in flexibility — reducing withdrawals in market downturns, having other income sources, or staying open to occasional part-time work — dramatically improves retirement success rates at any withdrawal rate.
Common misconceptions about the 4% rule
Three persistent myths and what the original study actually says.
Myth
“The 4% rule means you'll run out of money after 25 years”
Reality
No. The 25× number is the portfolio size, not how long it lasts. Historically, a 4% withdrawal from a balanced portfolio often ends up with more money than you started with after 30 years.
Myth
“The 4% is fixed — you take exactly 4% every year”
Reality
The original study adjusts the withdrawal amount for inflation each year (not the percentage). Year 1 you withdraw 4%; in subsequent years you withdraw the same dollar amount adjusted for CPI.
Myth
“The 4% rule only works in the US”
Reality
Studies using global market data generally support a 3.5%–4% withdrawal rate for diversified international portfolios, though results vary by country. A globally diversified portfolio is the safest approach.
Calculate your FIRE number now
Enter your spending, savings rate, and investment return to find your exact FIRE number and retirement timeline.