Safe Withdrawal Rate (SWR)
The maximum percentage of an investment portfolio that can be withdrawn in the first year of retirement, and adjusted for inflation annually thereafter, without depleting the portfolio before the end of the planned retirement period.
Systems Engineering Analogy
The maximum sustainable discharge rate of a battery or buffer without exhausting the stored energy before the system lifecycle terminates.
Mathematical SpecificationDeterministic
Withdrawal_t = Portfolio_0 * SWR * Product(1 + Inflation_k)Variables:
Portfolio_0:Initial portfolio balance at retirement commencement
SWR:Safe withdrawal rate percentage (typically 3.0% to 4.0%)
Inflation:Annual inflation factor adjusting subsequent annual withdrawals
Worked Example Scenario
Under the 4% rule, a $1,000,000 portfolio permits an initial annual withdrawal of $40,000, adjusted annually for inflation across a 30-year retirement.
Featured in: Book 08: The Allocation Problem
Read complete guide