The 4% rule is a retirement planning rule of thumb: withdraw 4% of your pot in year one, then increase that amount with inflation each year. It's also called the 25x rule — multiply your annual spending by 25 and that's roughly the pot you need. Spend $40,000 a year? You're targeting a $1,000,000 portfolio. Simple as that.

It also works in reverse: if you're already retired, divide your portfolio by 25 to get a rough guide to what you can safely spend each year.

The rule was created by William Bengen, a financial planner from California, who published his research in the Journal of Financial Planning in October 1994. He wanted a data-driven answer to: "How much can I actually spend in retirement?"

He ran numbers against historical US market data back to 1926 and found that 4% (originally 4.15%, rounded down) was the worst-case floor — not the average. He modelled a hypothetical retiree who retired in 1968: right at a stock market peak, just before a decade of punishing inflation. Even in that nightmare scenario, 4% held up for 30 years.

Nominal means the actual number on the price tag in the future — what your bank statement will say. Today's money means what that future amount can actually buy, adjusted for the fact that prices rise over time.

A simple example: if inflation runs at 2.8% for 30 years, you'd need roughly $230 in future money to buy what $100 buys today. The nominal figure is $230 — that's the cash. The today's money figure is $100 — that's the purchasing power.

This calculator shows both so you can see the actual cash number and understand what it really means. When you see an amber figure labelled "today's money", it's telling you: this is the equivalent in today's prices.

Inflation silently erodes purchasing power. $36,000/year today sounds like a clear goal — but in 30 years at 2.8% inflation, you'd need roughly $80,000/year just to buy the same things. That's why this calculator inflates your target to retirement before working out how much to save.

The nominal figures (what the money actually is in future dollars) are shown as the headline. The today's money equivalent (what it's worth in purchasing power) is shown in amber underneath. Both matter — the nominal tells you what the number will be, the real tells you what it means.

Yes — but it's very unlikely, and the story is actually more reassuring than most people think. Even William Bengen, the financial planner who created the 4% rule, later said that for a 30-year retirement people could safely withdraw 4.7% or more — and that many retirees were actually saving too much out of unnecessary caution. The 4% rule was designed to survive the worst historical periods, including the Great Depression. In most scenarios, your pot will outlast you comfortably.

This is a simple compound growth model. Here's what it doesn't factor in — some of these work in your favour, some against.

Things that could mean you need less

• State pension, Social Security, or government benefits
• Employer pension contributions or matching
• An inheritance, windfall, or property sale
• Part-time income or freelance work in early retirement

Things that could mean you need more

• Market volatility — real returns fluctuate year to year. A bad run early in retirement can hurt more than the average suggests (sequence-of-returns risk)
• Tax — no income tax on withdrawals, capital gains, or investment returns is included
• Investment fees — fund charges and platform costs reduce your real return
• Annual compounding — contributions are modelled once a year rather than monthly, which slightly understates what you need to save. Treat the figures as a floor, not a ceiling

Yes. The returns assume your money is actively invested — in stocks, bonds, or a mix through a pension, ISA, brokerage account, or similar.

Investing sounds risky — something for finance professionals. So most people leave money in savings accounts and tell themselves they're being sensible.

If you have a pension, you are already an investor. A pension isn't a savings account — it's money put to work in financial markets on your behalf, growing through compound investment returns.

Every assumption in this calculator is based on publicly available historical data. All returns are nominal (not inflation-adjusted) unless stated.