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The rule suggests withdrawing 4 percent of your retirement savings annually, adjusted for inflation, to avoid running out of money. Paired with the 25x rule (multiplying annual spending by 25 to determine a retirement goal), this strategy provides a safety margin. Carlson notes that while historical data often shows retirees ending up with more money than they started with, it’s wise to save more than the minimum requirement due to uncertainties like market fluctuations and changing life circumstances.