What the 4% rule is
The 4% rule is a simple answer to a hard question: how much can I spend from my savings without running out? It says you can withdraw about 4% of your portfolio in the first year of retirement, then increase that amount with inflation each year, with a strong chance the money lasts around 30 years.
The 4% rule on €500,000
Take a €500,000 portfolio. Four percent of it is €20,000 in the first year — about €1,667 a month. In year two you raise that €20,000 by inflation, and so on. The percentage sets only the starting withdrawal; after that you are tracking prices, not the market.
Where the rule comes from
It comes from studies of long historical periods that asked which withdrawal rate would have survived every 30-year stretch, including bad ones. Four percent was the answer that almost always lasted. It is a rule of thumb, not a guarantee — but a well-tested one.
Turn it around: the 25× shortcut
Because 4% is one twenty-fifth, the rule also works backwards: you need about 25 times your annual spending saved. Want €24,000 a year (€2,000 a month)? That is €600,000. Prefer to think in monthly terms? Multiply the monthly income you want by 300 — €2,000 × 300 is the same €600,000.
When 4% is too aggressive
The rule assumed a roughly 30-year retirement. If you retire early and need the money to last 40 years, or you simply want more margin, a lower rate like 3.5% is safer. On €500,000 that trims the income to about €1,458 a month — the price of extra caution.
Run your own number
Enter your portfolio, target income and a withdrawal rate into the retirement target calculator to see your safe income and the portfolio any target needs. To see how much €2 million would pay under the same rule, read retiring at 60 with €2 million.