The 4% rule

The 4% rule says a retiree might withdraw 4% of the portfolio in year one, then adjust that dollar amount for inflation. In U.S. historical studies it often lasted 30 years. It is a planning convention, not a floor under future markets.

Arc · Published September 18, 2026 · Updated September 18, 2026

What the research actually tested

William Bengen looked at historical U.S. stock and bond returns and asked which initial withdrawal rate would have survived 30 years in the worst periods he studied. Four percent was the rate that held up in those samples. Later work, including the Trinity study, asked similar questions with different portfolios and time spans.

The useful reading is narrow: a starting rate, a 30-year horizon, and a U.S. mix of stocks and bonds. Early retirement often needs more than 30 years. Other countries and other mixes did not all clear 4%.

After year one, the classic rule adjusts the dollar withdrawal for inflation. It does not take 4% of whatever the portfolio is worth that year. A percent-of-current-balance rule spends less after a crash and more after a boom. They are different rules.

Year-1 withdrawal = portfolio × 0.04

Example

A $1,000,000 portfolio at 4% supports $40,000 in year one. If inflation is 3%, year two is $41,200, even if the portfolio fell. That rigidity is why sequence risk matters. A flexible rule that trims spending after a drop is a different plan.

When 4% is the wrong frame

A retirement longer than 30 years.
Spending that is mostly essential, with no room to cut.
A portfolio that is mostly cash or a single house.
Income you have not counted, such as Social Security later on.

Common questions

Is 3% safer?

A lower starting rate leaves more margin in the historical studies, at the cost of a larger portfolio for the same spending. Safer is not the same as necessary. It depends on horizon, flexibility, and other income.

Sources

Bengen, William P. “Determining Withdrawal Rates Using Historical Data.” Journal of Financial Planning, 1994.