If you’ve been told to withdraw 4% of your savings each year in retirement, here’s something that may surprise you: the creator of the 4% rule now says it was too conservative.
Bill Bengen has updated his research and raised his “safe” withdrawal rate to 4.7%. But the real lesson isn’t the new percentage—it’s that a rule of thumb was never meant to be your retirement plan.
Key Takeaways
- The original 4% rule was designed as a worst-case scenario.
- Its creator now believes 4.7% is a more accurate safe withdrawal rate.
- Many retirees may be able to spend more than they think.
- Portfolio structure and tax planning matter more than a fixed percentage.
What Is the 4% Rule?
The 4% rule is a retirement income guideline. It suggests withdrawing 4% of your portfolio during your first year of retirement and then adjusting that amount annually for inflation.
Financial planner Bill Bengen developed the rule in 1994 after analyzing hundreds of historical market scenarios using a portfolio consisting of roughly 60% stocks and 40% bonds.
His conclusion was that a withdrawal rate of approximately 4.15% would have survived even the worst retirement starting dates. That number was rounded down to the now-famous 4% rule.
Importantly, the 4% rule was created as a mathematical exercise—not a personalized retirement strategy.
Why the Creator Raised the Rule to 4.7%
Thirty years later, Bengen revisited his research using broader asset classes and more modern portfolio assumptions.
His updated findings suggest a safe withdrawal rate closer to 4.7%, even for retirees who experienced historically poor market conditions.
That’s roughly a 17% increase in retirement income compared to the traditional 4% rule.
For many retirees, that difference represents thousands of additional dollars available each year.
Is the 4% Rule Too Conservative?
For many retirees, yes.
The danger of being too conservative isn’t running out of money—it’s running out of time.
Many retirees spend less than they comfortably could during their healthiest years, only to leave behind large account balances they never enjoyed themselves.
Research has shown that a significant number of retirees following the 4% rule finish retirement with more money than they started with.
While that may sound positive, it can also indicate that they sacrificed experiences unnecessarily.
A Better Approach: Spending Guardrails
Instead of focusing on a single withdrawal percentage, consider establishing spending guardrails.
Guardrails create a range of sustainable spending levels and provide guidance for when adjustments may be needed.
Depending on factors such as taxes, Social Security timing, and portfolio design, many retirees may safely spend somewhere in the 5%–5.5% range.
This is not a guarantee, but rather a personalized framework that can evolve as circumstances change.
Why Portfolio Structure Matters More Than Withdrawal Rate
The withdrawal rate is only one piece of the equation.
Keep at least five years of retirement income outside the stock market in individual bonds with defined maturity dates.
Having several years of spending needs already set aside reduces the pressure to sell investments during market downturns.
This allows the stock portion of your portfolio to remain invested for long-term growth while providing peace of mind during periods of volatility.
Don’t Forget Taxes
The 4% rule says nothing about taxes.
Yet the order in which you withdraw from your accounts can significantly impact how much income you actually keep.
Strategies such as:
- Roth conversions
- Tax-bracket management
- Social Security timing
- Required minimum distribution planning
can potentially save tens or even hundreds of thousands of dollars over the course of retirement.
A withdrawal strategy determines how much you take out. Tax planning helps determine how much you keep.
Bottom Line
The 4% rule remains a useful starting point, but it should not be treated as a retirement plan.
Even its creator now believes many retirees can safely spend more.
With proper portfolio construction, thoughtful tax planning, and a personalized withdrawal strategy, retirement income can often be both higher and more sustainable than a simple rule of thumb suggests.
Frequently Asked Questions
Is the 4% rule still accurate?
It’s still a useful starting point, but Bill Bengen now believes a safe withdrawal rate is closer to 4.7% based on updated research.
How much can I safely withdraw each year?
The answer depends on your portfolio, tax situation, income sources, and retirement goals. A personalized retirement plan provides a more accurate answer than any universal rule.
What’s the difference between the 4% and 4.7% rules?
The 4.7% figure reflects Bengen’s updated research using broader diversification assumptions and represents roughly 17% more income than the traditional 4% rule.
Why might the 4% rule cause retirees to underspend?
Because it was designed to survive the worst-case historical scenarios, many retirees who follow it end up leaving behind more money than they ever needed to preserve.
About Dave Zaegel
Dave Zaegel is a CPA and CFP® professional and owner of CWOs for Hire, a fee-only financial planning firm serving pre-retirees and retirees.
As both a CPA and CFP® professional, Dave integrates retirement income planning and tax planning into a single coordinated strategy.
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