The 4% rule: foundation of FIRE — and where Switzerland diverges

The 4% rule is the most-cited principle in FIRE. It comes from US data — Swiss investors must factor in wealth tax, CHF inflation and the bridge phase.

"Withdraw 4% of your starting portfolio each year, adjust for inflation — and the capital lasts at least 30 years." This conclusion from the Trinity Study (1998) is the most-cited principle in FIRE. But the study is based on US equities and US bonds, measured in US dollars. For Swiss investors, there are important adjustments.

What the 4% rule says

William Bengen analysed historical US market returns in 1994 and found: anyone withdrawing at most 4% of their starting portfolio per year (inflation-adjusted) has essentially never run out of money over any historical 30-year period. The Trinity Study confirmed this with a 50/50 to 75/25 equity/bond mix.

The study defined 'success' as: portfolio survives 30 years. It says nothing about what is left after 30 years — and nothing about 40- or 50-year periods, as can arise from retiring early at 40.

Why US data cannot be transferred directly

The US has had historically exceptional equity market returns by global standards. A globally diversified portfolio — sensible for Swiss investors — shows somewhat lower long-run returns. At the same time, Swiss inflation has historically been lower (1.5–2% vs. 3–4% in the US), which partially compensates the real return.

What makes Switzerland special

• Wealth tax: depending on canton 0.1–0.7% of net wealth per year — a direct deduction from withdrawal capacity.
• Health insurance premiums: CHF 3,600–7,200 per year without employer contribution, inflation-exposed.
• AHV contributions for the non-employed: up to CHF 26,500/year, depending on wealth.
• Bridge phase: the first years without AHV/Pensionskasse/3a require higher withdrawals — the rate is not uniform over time.

The 'Swiss FIRE Rate': 3.0–3.5%

Many Swiss FIRE planners work with a more conservative withdrawal rate of 3.0–3.5%. This accounts for wealth tax, the higher fixed costs during the bridge phase, and retirements that can last 40–50 years. The 3.5% rate survives historically even 40-year periods with a globally diversified portfolio almost without exception.

Sequence-of-returns risk

The biggest danger to a FIRE portfolio is not the average return — it is a severe crash in the early years of retirement. When the portfolio falls while withdrawals are happening simultaneously, a ratchet effect arises: you sell cheaply and barely benefit from the recovery. Monte Carlo simulations model this risk explicitly.

Rule of thumb: the longer the planned retirement (often 40+ years for early retirees), the more conservative the withdrawal rate should be — and the more important a cash reserve for crash years.

The Pillar Zero calculator shows your personal sustainable withdrawal rate — including the AHV timeline, capital taxes, and a Monte Carlo simulation over 10,000 scenarios.