The 4% rule comes from the Trinity Study (1998), which found that withdrawing 4% of your portfolio in year one, then adjusting for inflation each year, has historically sustained portfolios for 30+ years in approximately 95% of historical periods tested (using a 50/50 stock/bond allocation).
The formula: multiply your expected annual expenses by 25 to find your FIRE number.
4% Rule Target
Expenses × 25
$1,000,000
Conservative Target
Expenses × 29 (3.5% rule for early retirees)
$1,160,000
About the 4% Rule
The Trinity Study (1998) found that withdrawing 4% of your portfolio in year one, then adjusting for inflation annually, sustained portfolios for 30 years in approximately 95% of historical periods tested (using a 50/50 stock/bond allocation). For early retirees with 40+ year horizons, research suggests a more conservative 3.5% rate.
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