The 4% rule comes from the Trinity Study, which back-tested historical US market data. It's a starting rule of thumb, not a guarantee — retirees in extreme bear markets have sometimes needed to trim.
The inverse gives you a savings target: 25 × your annual spending = the portfolio needed to live off 4%. Spend $40k a year, target roughly $1M invested.
See also
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Open Financial OS →Frequently asked questions
Is 4% still safe?
Debated. Some researchers argue 3.3–3.5% is safer for very long retirements or with low starting yields. Others show 4% has held up well historically.
Related terms
FIRE (Financial Independence, Retire Early)
A movement focused on saving aggressively enough to make paid work optional decades before traditional retirement.
Retirement
The stage of life when you have enough savings and income to make paid work optional.
Asset allocation
How you split your portfolio across broad asset classes — stocks, bonds, cash, and alternatives.