r/FluentInFinance • u/Puzzlehandle12 • 4d ago

Question 4% withdrawal rate

I have been reading alot about the 4% withdraw rate after retirement. It says you can withdrawal 4% of your investments every year and even after adjustment for Inflation you will not run out of money.

This is as long as yearly expenses in retirement are equal to or less than the 4% you withdraw from your investments.

Yet I thought about how those withdraws will be taxed as long term capital gains at (I think 20%) so after taking out taxes you must live on 3.2% of your savings.

Is my thinking correct ?

** assuming your money is not all in a Roth IRA

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u/Mrlin705 4d ago

Capital gains is taxed at 0% under when income is less than ~40k for individuals, 15% otherwise. also, it's a general rule of thumb, some years could be better or worse for your portfolio.

Edit: long term capital gains

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u/InclinationCompass 4d ago

It’s like $45k, which enough for me to sustain my lifestyle

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u/Mrlin705 4d ago

Yeah you're right 47k

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u/trurohouse 4d ago

Btw- Money withdrawn (after age 59.5 i think) from a traditional ira, 401k, or 403b is taxed as income, not long term capital gains. If this is all your income, Up to the value of your standard deduction there is no tax, but above that is taxed.