The 4% rule is a guideline for retirees to withdraw approximately 4% of their portfolio each year, ensuring their savings continue to grow and last throughout retirement. For instance, if a retiree needs $100,000 annually and has $40,000 from other sources, they would withdraw $60,000 from their portfolio, necessitating a starting portfolio of around $1.5 million. It’s important to consider taxes and inflation; retirees should increase their withdrawal amount by 2% annually to keep up with inflation. The 4% rule aims to prevent retirees from depleting their savings by maintaining a sustainable withdrawal rate.

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