Safe Withdrawal Rate
The percentage of your portfolio you can withdraw in the first year of retirement, adjusted for inflation thereafter, with low risk of running out.
The safe withdrawal rate (SWR) is the share of your starting portfolio you can spend in year one of retirement — then increase with inflation each year — while keeping the risk of depleting the portfolio acceptably low over a long retirement. The well-known 4% figure comes from the Trinity Study, which tested historical 30-year periods.
The rate is a probability, not a promise. The 4% guideline was built on a 30-year horizon and U.S. historical returns; a longer retirement, lower future returns, or a bad sequence of early losses can all argue for a more conservative rate like 3.5% or 3%. Many retirees also use flexible strategies, spending less after down years rather than mechanically raising withdrawals.
Sequence of returns risk is the reason the rate matters so much. A market drop in the first few years of retirement does far more damage than the same drop later, because withdrawals lock in losses on a shrinking balance.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.