3 Percent Rule Retirement Calculator

Formula

The formula to calculate the annual retirement income (RI) based on the 3 Percent Rule is:

\[ \text{RI} = \text{P} \times \text{r} \]

Where:

$\text{RI}$ is the annual retirement income ($)
$\text{P}$ is the total retirement savings ($)
$\text{r}$ is the withdrawal rate (3% or 0.03)

What is the 3 Percent Rule for 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. This rule is designed to ensure that the retiree’s savings last for at least 30 years. It is a more conservative approach compared to the commonly referenced 4% rule.

Example Calculation

Let's assume the following value:

Total Retirement Savings (P) = $1,000,000

Using the formula to calculate the annual retirement income (RI):

\[ \text{RI} = \text{P} \times \text{r} = 1,000,000 \times 0.03 = 30,000 \text{ dollars} \]

The annual retirement income (RI) is $30,000.