Many of our readers are familiar with the 4% rule for retirement withdrawals.   Here's a  withdrawal rate refresher on our web site.

CNNMoney explains this 4% "rule of thumb" for retirement and explains how to factor in inflation.

But before I get into some of the subtleties about this oft-quoted rule, let me explain how it works. Many people think that the 4 percent rule means that you simply withdraw 4 percent of retirement savings each year. But that's not right. In fact, the 4 percent figure applies only to the percentage of your savings that you withdrawal the first year of retirement.

You then increase the dollar amount of that initial withdrawal for inflation each year.

So, for example, if you have $1 million in your 401(k), you would pull out $40,000 the first year. If inflation were running at, say, 3 percent a year, you would increase that amount to $41,200 the second year, roughly $42,400 the third year and so on.