The 4% Rule

The 4% rule is a retirement-spending guideline suggesting that a retiree can withdraw 4% of their portfolio in the first year, then increase that dollar amount with inflation each year, and have a high chance the money lasts about 30 years. On a $1,000,000 portfolio, that means roughly $40,000 of first-year income, rising with prices thereafter. It is the most famous single answer to the safe withdrawal rate question.

The rule traces to financial planner William Bengen's 1994 research and the later Trinity Study, both of which tested historical US stock and bond returns to find the highest starting withdrawal rate that would have survived every rolling 30-year period, including retirements that began right before the 1929, 1973, and 2000 downturns. The 4% figure was calibrated specifically to withstand the worst historical sequences of returns, which is what makes it a conservative benchmark rather than an average-case guess.

Its assumptions are worth keeping in view. It presumes a roughly 50-75% equity allocation, a 30-year horizon, low fees, and rigid annual inflation adjustments regardless of how markets perform. Change any of those and the safe number changes: a 40- or 50-year early-retirement horizon points toward a lower rate, while flexibility to cut spending in down years can justify a higher one.

The 4% rule is best treated as a sturdy starting point and a sanity check, not a precise prescription. Real retirees adjust as they go, keep cash buffers, and revisit the plan as circumstances change. Use the safe withdrawal calculator on this site to see how sensitive the outcome is to the rate and return you assume — the exercise reveals why no single percentage can be universally safe.