Is the 4% rule still accurate today?

It's still a reasonable starting point, but current research suggests a range closer to 3.7% to 4.7% depending on your assumptions about stocks, bonds, and how long your retirement needs to last. Treat 4% as a rough guideline, not a guarantee.

What happens if I withdraw more than the safe rate?

You increase the risk of running out of money before the end of a long retirement, especially if a market downturn hits early in your retirement. A higher withdrawal rate can still work if you're willing to cut spending in bad years.

Does the 4% rule account for Social Security?

No. The rule applies to the portion of your expenses covered by your investment portfolio. Guaranteed income like Social Security or a pension reduces how much you need to pull from savings each year.

Should early retirees use a lower withdrawal rate?

Generally yes. The original research was built around a 30-year retirement. If you're retiring in your 40s or 50s, a longer time horizon means more years for a market downturn to do damage, so a more conservative starting rate is usually safer.

The 4% Rule Explained: How Much You Can Actually Withdraw in Retirement

The 4% rule tells you how much retirement savings you can spend each year without running out. Here's how it works and its current limits.

You've spent decades building a retirement account. Then one day you stop getting a paycheck, and a new question replaces "how much should I save?" with "how much can I actually spend?" That's what the 4% rule tries to answer, and it's worth understanding before you're standing at the edge of retirement trying to figure it out for the first time.

Where the 4% Rule Came From

The rule traces back to financial planner William Bengen, who in 1994 tested historical stock and bond returns to see what withdrawal rate a retiree could sustain without running out of money. Bengen picked 4% as the highest rate that never failed in the dataset.

The idea got more attention a few years later from a group of finance professors at Trinity University, whose research became known as the Trinity Study. The authors backtested a number of stock/bond mixes and withdrawal rates against market data compiled by Ibbotson Associates covering the period from 1925 to 1995. They stated that if history is any guide, withdrawal rates of 3% and 4% are extremely unlikely to exhaust any portfolio of stocks and bonds during any of the payout periods shown.

In plain terms: if you withdraw 4% of your portfolio balance in year one of retirement, then adjust that dollar amount for inflation every year after, historical data suggests your money should last roughly 30 years — as long as you hold a meaningful chunk of stocks.

The Math Behind the Number

Say you retire with $1,000,000 saved.

Year 1 withdrawal: 4% of $1,000,000 = $40,000
Year 2: $40,000 adjusted for that year's inflation rate
Year 3: Year 2's amount adjusted for that year's inflation rate
And so on, regardless of how the market performs

The appeal is simplicity. You don't recalculate your withdrawal every year based on your account balance — you set it once and adjust only for inflation. The tradeoff is that it doesn't respond to a market crash or a boom; you withdraw the same real amount either way.

Why the Number Isn't Fixed at 4% Anymore

Bengen's original research and the Trinity Study looked backward at historical U.S. market returns. More recent research firms look forward, using current bond yields, stock valuations, and inflation expectations to estimate what a "safe" rate looks like going forward — and that number moves depending on market conditions at the time you retire.

Morningstar publishes an annual update to this research. In 2024, the firm estimated the highest starting safe withdrawal rate for a 30-year retirement with a 90% success rate was 3.7%, down from 4.0% the year before. That adjustment reflected the effects of higher equity valuations and lower fixed-income yields, which reduced return expectations for stocks, bonds, and cash over the next 30 years.

The number then moved again. In their annual report published in December 2025, Morningstar raised their recommended safe withdrawal rate to 3.9% for 2026, up from 3.7%. The increase reflected higher bond yields, in the 4-5% range on Treasuries, and reasonable equity valuations.

Bengen himself has revisited his own work too. In his 2025 book, he adjusted his recommendation to a first-year withdrawal rate of 4.7%, assuming a 30-year horizon with a portfolio allocation of up to 65% equities, 30% bonds and 5% cash.

What This Actually Means for You

Don't treat 3.7%, 3.9%, or 4.7% as a number to chase. These figures come from different assumptions, different time horizons, and different portfolio mixes. What matters is understanding the moving parts:

Your time horizon matters. The 4% rule and its variations are typically built around a 30-year retirement. If you're retiring at 45 instead of 65, a much lower withdrawal rate is safer because your money needs to last longer.
Your stock allocation matters. Historical research shows success rates rise with higher stock allocations, up to a point. A portfolio that's too conservative can fail just as easily as one that's too aggressive, because it doesn't grow enough to outpace withdrawals and inflation.
Flexibility beats precision. Research increasingly shows that retirees willing to adjust spending in bad market years — spending less after a downturn, more after a good stretch — can safely start with a higher withdrawal rate than someone locked into a fixed number.
90% success isn't 100% success. Every version of this research is a probability, not a guarantee. A 90% success rate over 30 years still means a 1-in-10 chance the money runs short under historical stress scenarios.

A Simple Way to Use This Rule Today

Take your expected retirement spending and divide it by a withdrawal rate between 3.5% and 4% to get a rough savings target. For example, if you expect to need $50,000 a year from your portfolio (on top of Social Security), divide that by 0.04 to get a $1.25 million target, or by 0.035 for a more conservative $1.43 million target.

This is a planning tool, not a rule you follow blindly on day one of retirement and never touch again. Revisit it every few years, especially as you get closer to actually retiring, since your real withdrawal rate should reflect the market conditions and interest rates at the time you stop working — not conditions from a decade ago.

If you're not sure where your current savings rate and retirement trajectory stand relative to a goal like this, running your numbers through a tool like Grade My Finance can give you a quick read on whether you're on pace, without requiring you to build a spreadsheet from scratch.

The Bottom Line

The 4% rule isn't a law of physics — it's a rule of thumb built from historical data, and the "safe" number shifts as market conditions change. Use it as a starting point for how much you need to save, stay flexible about spending once you're actually retired, and don't panic every time a research firm updates its recommendation by two-tenths of a percent.