The Safe Withdrawal Rate Calculator does two jobs: it turns a portfolio into the income it can support, and it tells you the nest egg a target income requires.
Income from a portfolio
annual income = portfolio value × withdrawal rate
At the classic 4% rule, a 1,000,000 portfolio supports 1,000,000 × 0.04 = 40,000 a year, or about 3,333 a month. The withdrawal rate is the dial: a
cautious 3.5% gives 35,000 from the same pot, a higher 5% gives 50,000 but with
more risk of running short.
The nest egg for a target income
Run it the other way to find your “number”:
nest egg needed = desired annual income ÷ withdrawal rate
For 40,000 a year at 4% you need 40,000 ÷ 0.04 = 1,000,000. This is the same
maths as the 25× rule (since 1 ÷ 0.04 = 25), so a target income times 25 gives
the 4% figure directly.
A guideline, not a guarantee
The 4% rule comes from historical market data over 30-year retirements. Longer retirements, fees, tax, and a poor run of early returns can all change the outcome, so many planners use a lower rate or adjust spending year to year. Use this as a planning starting point and revisit it as your circumstances change.