Safe Withdrawal Rate: Is the 4% Rule Still Safe?
The safe withdrawal rate (SWR) is the percentage of your portfolio you can spend in year one of retirement, adjusting for inflation every year after, without running out of money. The famous number is 4% - but that figure is 30 years old, and the question "is it still safe?" gets asked every time the market wobbles. Here's what the current research actually says.
Where the 4% rule came from
Financial planner William Bengen published the original research in 1994. He tested a 50/50 stock-bond portfolio against every 30-year retirement start date in U.S. history back to 1926, adjusting spending for inflation each year, and found that a 4.15% initial withdrawal rate survived every one of them - even retirees who started right before the Great Depression or in the 1970s stagflation. Round down, and you get the "4% rule." Divide 100 by 4 and you get the companion shortcut: your FIRE number is roughly 25× your annual spending.
What's changed since 1994
Two things move the number, and they currently point in opposite directions:
- Bengen's own updated research says higher. In his 2025 book A Richer Retirement, Bengen expanded the test portfolio beyond just large-cap stocks and bonds to include small-cap, mid-cap, micro-cap, and international stocks. With that broader diversification, his worst-case safe rate rose to 4.7%.
- Morningstar's forward-looking research says a bit lower. Instead of replaying history, Morningstar models expected future returns given today's starting valuations and bond yields. Their most recent estimate for a 30-year, moderately conservative portfolio (30-50% stocks) is about 3.9% - up slightly from 3.7% the year before, but still under the classic 4%.
The honest range from serious researchers today is roughly 3.7% to 4.7%, depending on your asset mix, time horizon, and whether you trust history to repeat or think today's high valuations mean lower future returns.
Why the "safe" in safe withdrawal rate is worst-case, not average
This is the most misunderstood part of the 4% rule. It isn't the average outcome - it's the rate that survived the worst historical starting point. In most historical periods, a 4% starting withdrawal left retirees with more money than they started with after 30 years, often two or three times as much. You're not aiming for "just barely enough" - you're buying insurance against the unlucky sequence.
The single biggest risk it's protecting against
A 4% rule failure almost never comes from average bad returns - it comes from a sharp market drop in your first few retirement years, before the portfolio has had time to recover, while you're still withdrawing from a shrunken balance. Two retirees with identical average lifetime returns can have wildly different outcomes depending on the order those returns arrive in. That's why the years right around your retirement date matter more than any other stretch of your investing life.
How to pick your own number
- Shorter horizon (traditional retirement, ~30 years or less): 3.9-4.2% is reasonable, closer to the higher end if your portfolio is well-diversified and you're willing to trim spending in a bad stretch.
- Longer horizon (FIRE, 40-50+ years): lean toward 3.25-3.75%. A longer retirement gives bad sequences more time to do damage, so the math favors a lower starting rate or a flexible one.
- Guaranteed income coming later (Social Security, a pension) lowers how hard your portfolio has to work in the years before that income starts - see when to claim Social Security for the tradeoffs.
- Flexible spending beats a fixed rate. Retirees willing to cut spending modestly in down markets and ease off the brakes in good ones ("guardrails" strategies) can often start closer to 5-5.7% with similar safety, because the plan adapts instead of blindly following a fixed schedule into a bad sequence.
It's a starting point, not a straitjacket
No withdrawal rate, chosen at retirement and never revisited, is actually how real people spend money. Check in yearly: if the portfolio is well ahead of schedule, you have room to loosen up; if a rough few years have you behind, trimming discretionary spending for a while does more for your odds of success than almost anything else. Where you draw the money from each year matters too - see which account to withdraw from first for the tax side of the decision.
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Frequently asked questions
- Is the 4% rule still safe in 2026?
- Current research puts the range roughly between 3.7% (Morningstar, using forward-looking return assumptions) and 4.7% (Bengen's updated worst-case estimate using a more diversified portfolio). The classic 4% sits comfortably inside that range, especially for a traditional 30-year retirement, but longer FIRE-length horizons usually call for something closer to 3.25-3.75%.
- Where does the 4% rule come from?
- William Bengen's 1994 study tested a 50/50 stock-bond portfolio against every 30-year retirement starting point in U.S. history since 1926 and found a 4.15% inflation-adjusted withdrawal rate survived all of them. It was rounded down to the "4% rule."
- What is sequence of returns risk?
- It is the danger that a market decline early in retirement, combined with ongoing withdrawals from a shrunken balance, permanently damages a portfolio's longevity - even if the average return over the full retirement turns out fine. It is the main risk a safe withdrawal rate is designed to guard against.