The 4% rule (Trinity Study)
RetirementThe 4% rule comes from the Trinity Study of 1998 (Cooley, Hubbard, Walz) – an analysis of US stock and bond portfolios over rolling 30-year periods based on market data from 1926.
Result: a diversified portfolio (50% stocks / 50% bonds) survives 30 years with a success rate of over 95% if at most 4% of the initial wealth is withdrawn each year (adjusted for inflation).
What this means:€500,000 portfolio → €20,000 safely withdrawable / year → €1,667 / month. The portfolio "lives on" – historically it held up in 95% of rolling 30-year periods (US data from 1926, 50/50 portfolio).
Important limitations:The study is based on US stock-market data with a withdrawal period of exactly 30 years. For longer FIRE horizons (40+ years, typical for early retirement), the success rate at 4% drops noticeably – partly below 90%. European investors and early-FIRE planners therefore often use 3.0–3.5% as a more conservative estimate. FireLotse lets you choose your target withdrawal rate yourself between 2% and 8%.
In FireLotse:The target withdrawal rate determines how much capital you need for financial independence (FIRE number = gross withdrawal ÷ rate). Your actual withdrawals are calculated individually for each life phase from budget, taxes and health insurance – they can differ from the target rate.
Inflation is built in:The 4% rule is inflation-adjusted by definition – it assumes that the withdrawal rises with inflation every year. FireLotse consistently calculates in today's purchasing power: all projections use real returns (after deducting inflation).