Even the Man Who Invented the 4% Rule Doesn't Use It Anymore

If you have spent any time near a retirement calculator, a podcast, or a well meaning uncle at Thanksgiving, you have heard "the 4% rule." Withdraw 4% of your portfolio the first year of retirement, adjust for inflation every year after, and your money should last 30 years. It is tidy, memorable, and treated like a law of physics. It is also, by the admission of the man who invented it, not a rule at all.

Where the number actually came from

In October 1994, financial planner William Bengen published a study testing what percentage a retiree could safely withdraw from a 50/50 stock and bond portfolio, using market data back to 1926, without running out of money over a 25 to 30 year retirement.¹ The number that survived every historical stretch he tested, including the Great Depression and the stagflation of the 1970s, was 4%. That was never meant to be everyone's number. It was the worst case scenario baked into one lifespan assumption, one asset mix, and one definition of "safe."

Even Bengen has moved on

Ask Bengen today and he will tell you 4% was always the floor, not the target. He now puts his own "SAFEMAX" closer to 4.7%, and says most retirees with a reasonably diversified portfolio can comfortably withdraw 5.25% to 5.5% without running dry.² His bigger worry these days is not the starting number at all. It is inflation, which he now calls the single biggest threat to a retirement plan, and he recommends revisiting your withdrawal rate every couple of years instead of setting it once and walking away.²

The number moves every year anyway

Even the researchers who still like the 4% framework cannot agree on 4%. Morningstar publishes an updated "safe withdrawal rate" every year, and it has ranged from 3.3% to 4.0% over the last several years depending on bond yields and market valuations, landing at 3.9% for 2026.³ A rule that changes annually based on where interest rates happen to sit is not really a rule. It is an estimate wearing a rule's clothing.

Timing matters more than the number

Here is the part the simple math skips. Two retirees can earn the exact same average return over 30 years and end up in completely different places, purely because of when the bad years hit. Schwab modeled two retirees, each starting with $1 million and withdrawing $50,000 a year, who both hit an identical 15% market decline. One hit it in years one and two of retirement and ran out of money by year 18. The other hit it in years ten and eleven and still had nearly $400,000 left at that same year 18 mark.⁴ Same drop, same average, wildly different outcome. That is sequence of returns risk, and it matters more than the percentage on your worksheet.

A more flexible way to spend

Instead of picking one number and freezing it for 30 years, some advisors use "guardrails," an approach built by Jonathan Guyton and William Klinger, where you start with a higher withdrawal rate and adjust spending up or down as your portfolio actually performs.⁵ Good years earn you a raise. Rough years mean trimming back temporarily, instead of guessing wrong for three decades straight.

The bottom line

The 4% rule is a fine napkin sketch, not a blueprint. Your real number depends on your mix of investments, when you retire relative to the market, how flexible your spending can be, and how long your retirement actually turns out to last. Worth mapping out on paper before locking in a number that even its own inventor no longer uses.

This is general education, not personalized financial advice. Your safe withdrawal rate depends on your full financial picture, including your investment mix, your other income sources, and how flexible your spending can be, so let's map out yours before assuming a number built for someone else's worst case fits you.

Sources

1. William P. Bengen, "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning, October 1994, hosted by the Financial Planning Association: introduces the 4% initial withdrawal rate, adjusted annually for inflation, as the historically safe rate for a 50/50 stock and bond portfolio over a 25 to 30 year retirement using market data back to 1926. financialplanningassociation.org
2. Yahoo Finance, "The 4% rule is so 1994: Here's the original author's new retirement advice": William Bengen's updated "SAFEMAX" of 4.7% and his view that most retirees can withdraw 5.25% to 5.5%, along with his comments on inflation as retirees' greatest risk. finance.yahoo.com
3. Financial Advisor magazine, "Morningstar Safe Retirement Withdrawal Rate For 2026 Is 3.9%": Morningstar's annual safe withdrawal rate research, its year over year movement since 2021, and its 2026 figure of 3.9% for a 30 to 50% equity portfolio over a 30 year horizon. fa-mag.com
4. Charles Schwab, "What Is Sequence-of-Returns Risk?": the two retiree, $1 million portfolio comparison showing how an early versus late 15% market decline changes 30 year retirement outcomes despite identical average returns. schwab.com
5. White Coat Investor, "What Is the Guyton-Klinger Guardrails Approach for Retirement?": explains the guardrails withdrawal strategy created by Jonathan Guyton and William Klinger, including the higher starting withdrawal rate and the rules for raising or cutting spending based on portfolio performance. whitecoatinvestor.com