How much you can afford to spend in retirement? It’s a question the majority of us inevitably face, yet it’s an answer that can prove elusive. This is where the 4% Rule can help. The 4% Rule is a general rule of thumb for how much you should be able to spend in retirement.

According to the rule, you should be able to spend about 4% of your starting nest egg value each year. So if you begin retirement with a portfolio of $1 million, then that should support roughly $40,000 in annual spending. Keep in mind, each situation will vary by investor, so consult with your financial advisor to see if this makes sense for you.

Watch our video to learn about how the 4% Rule fits in to your long-term financial plan.