Estimate first-year income, a portfolio target, an optional savings gap, or a constant-return longevity scenario using a stated withdrawal rate, taxes, fees, and inflation.

Estimate first-year withdrawals. The default 3% is a spending withdrawal rate; fees are an additional portfolio cost.

Default: 3%. Enter 3 for 3%, not 0.03. This excludes investment fees.

Taxes, fees, and other income

Optional. Blank means 0%. Applied only to portfolio withdrawals.

Optional. Blank means 0%. Fees reduce the portfolio separately from spending.

Optional. Blank means $0.

3 Percent Rule Retirement Formula

The following formula is used to calculate the annual retirement income based on the 3 Percent Rule.

RI = P × r

Variables:

  • RI is the annual retirement income ($)
  • P is the total retirement savings ($)
  • r is the withdrawal rate (3% or 0.03)

To calculate the annual retirement income, multiply the total retirement savings by the withdrawal rate. The result is a first-year gross withdrawal estimate, not a guarantee of sustainable income. Fees are an additional portfolio cost; they do not increase spendable income or reduce the portfolio target.

What is a 3 Percent Rule Retirement?

The 3 Percent Rule for retirement is a guideline that suggests a retiree should withdraw no more than 3% of their retirement savings during the first year of retirement. Each subsequent year, the withdrawal amount is adjusted for inflation. The rule does not ensure that savings last 30 years; outcomes depend on returns, their sequence, inflation, taxes, fees, and spending. It is a more conservative approach compared to the commonly referenced 4% rule.

How to Calculate 3 Percent Rule Retirement?

The following steps outline how to calculate the 3 Percent Rule Retirement.

  1. First, determine the total retirement savings ($).
  2. Next, enter the withdrawal rate as a percentage in the calculator: enter 3 for 3%. The formula uses its decimal equivalent, 0.03.
  3. Next, gather the formula from above = RI = P * r.
  4. Finally, select Calculate to estimate first-year gross withdrawal (RI). In the longevity mode, withdrawals occur at year-end and a partially paid year is not counted as fully funded.
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem : 

Use the following variables as an example problem to test your knowledge.

total retirement savings ($) = 500,000

withdrawal rate (r) = 0.03