The 4% rule is a benchmark for living off capital: withdraw 4% of the portfolio in year one, then the same amount indexed; capital = annual spending × 25.
The 4% rule is a way to estimate how much money you need to live off investments. In the first year you withdraw 4% of the portfolio's value, and then each year the same amount increased by inflation, whatever happens in the market. Hence the target formula: capital should equal annual spending multiplied by 25.
The rule was proposed by the American financial planner William Bengen in 1994: on US market data from 1926, this way of withdrawing lasted at least 30 years even for the worst retirement date, provided the portfolio held both stocks and bonds. The 1998 Trinity study later confirmed the calculation.
For other countries the rule proved more optimistic: on broader international data the safe rate is lower. In Ukraine high inflation, tax on investment profit and currency risk come on top, so planning more often uses 3-3.5% and a multiple of 29-33. The state pension, a small income and willingness to cut spending in bad years reduce the amount you need.
In detail, with examples: The 4% rule: how much you need to save to live off your investments
Safe withdrawal rate Sequence of returns risk Real return
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Where 4% came from, a capital table for different spending levels, the risk of bad early years, adjustments for the hryvnia and taxes, flexible strategies and the monthly contribution.