Retirement Nest Egg (4% Rule) Estimator mechanism

Model scope

The core arithmetic is standard for a rough educational estimator. Final approval requires an explicit input contract stating whether the rate is entered as a percentage such as 4 or a decimal such as 0.04, plus validation that the rate is positive for target-nest-egg calculations. The existing educational-only and rule-of-thumb disclaimer is appropriate.

• The formulas are mathematically correct for a decimal withdrawal rate: sustainable_withdrawal = balance × rate and target_nestegg = annual_spend ÷ rate. However, the specification does not explicitly define whether an input of 4 means 4% or 0.04; the implementation must normalize a percentage input by dividing by 100.
• The target_nestegg calculation requires withdrawal_rate to be nonzero and positive; this input constraint is not specified.

Units and conventions

• Balance and desired annual spend use the same currency and the same nominal or real-dollar basis.
• Desired annual spend is an annual amount, not a monthly amount; if monthly input is accepted, it must be multiplied by 12 first.
• A displayed withdrawal rate of 4% is converted to the decimal 0.04 before arithmetic; the default must therefore be 0.04 internally.
• The formula ignores taxes, fees, inflation adjustments, portfolio volatility, longevity, and sequence-of-returns risk.

Inspectable vector

One of 4 source-bound review vectors:

{
  "inputs": {
    "calculation": "sustainable_withdrawal",
    "balance": 1000000,
    "withdrawal_rate_percent": 4
  },
  "expected_outputs": {
    "sustainable_annual_withdrawal": 40000
  },
  "working": "Convert 4% to decimal: 4 ÷ 100 = 0.04; multiply balance by rate: 1,000,000 × 0.04 = 40,000."
}

Failure boundary

• target_nestegg causes division by zero when withdrawal_rate is 0%; reject zero before calculation.
• Negative withdrawal rates, negative balances, or negative annual spending should be rejected as invalid inputs.
• Very small positive withdrawal rates can produce extremely large target nest-egg values and may require range or overflow handling.
• Rates above 100% are mathematically computable but generally require an explicit warning or validation rule.
• The 4% rule is a historical rule of thumb, not a guaranteed sustainable withdrawal rate; the stated honest label should be displayed prominently and the result must not be presented as individualized financial advice.

Other records

Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

• VERIFIED_LEDGER.json
• evidence-tranche5/tranche5-results.json