FIRE
The safe withdrawal rate indicates what percentage of a portfolio can be withdrawn each year without depleting the capital prematurely.
The safe withdrawal rate quantifies what share of a portfolio can be withdrawn year after year without depleting the capital prematurely. It is one of the central figures in planning for retirement or financial independence.
The idea behind it: withdraw too much and the portfolio risks running dry too early, especially if weak stock-market years fall at the start of the withdrawal phase. Withdraw very little and a large, unused balance may remain at the end. The safe withdrawal rate looks for a level that has historically proved sustainable over long periods.
The concept became widely known above all through the Trinity Study and the 4% rule derived from it. It is important to remember that such rates rest on historical data and assumptions about return, inflation and duration. They offer orientation, not a guarantee, and should be adapted to one's own situation.
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