What Is the 4% Rule?

The 4% rule states that you can withdraw 4% of your retirement portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, and have a very high probability of not running out of money over a 30-year retirement. It is the most widely cited guideline in retirement planning.

The Origin: The Trinity Study

The 4% rule was popularized by financial planner William Bengen in 1994 and later validated by the "Trinity Study" (1998) by three professors from Trinity University. They analyzed historical stock and bond returns from 1926 to 1995 and found that a portfolio of 50–75% stocks and 25–50% bonds could sustain a 4% withdrawal rate for 30 years with a 95%+ success rate.

How to Apply the 4% Rule

The math is straightforward: multiply your expected annual retirement expenses by 25. This is your retirement target. For example:

  • Need $40,000/year → Target: $1,000,000
  • Need $60,000/year → Target: $1,500,000
  • Need $80,000/year → Target: $2,000,000
  • Need $100,000/year → Target: $2,500,000

Does the 4% Rule Still Work Today?

The 4% rule was developed based on historical data that included periods of high bond yields. With today's lower interest rate environment and higher stock valuations, some financial planners suggest a more conservative 3–3.5% withdrawal rate for longer retirements (35+ years). However, the 4% rule remains a solid starting point for most people planning a 30-year retirement.

Factors That Affect Your Safe Withdrawal Rate

  • Retirement length: Planning for 40 years requires a lower withdrawal rate than 25 years.
  • Portfolio allocation: A higher stock allocation historically supports higher withdrawal rates.
  • Flexibility: If you can reduce spending during market downturns, you can safely withdraw more in good years.
  • Social Security: Social Security income reduces the amount you need to withdraw from your portfolio.

The Bottom Line

The 4% rule is a useful starting point, not a guarantee. Use our Retirement Calculator to model your specific situation, including your current savings, monthly contributions, expected return, and retirement income needs.