Retirement Planning · Withdrawals
Is the 4% Rule Still Accurate in 2026?
The Short Answer
The 4% rule says that withdrawing 4% of your portfolio in the first year of retirement, then adjusting that dollar amount for inflation each year, has historically lasted at least 30 years. It remains a reasonable starting point, and the rule's creator, William Bengen, has since revised his own safe estimate upward to about 4.7%. But it is a guideline, not a guarantee, and it depends heavily on your portfolio mix and the timing of market returns.
The 4% rule is the most cited number in retirement income planning, and also one of the most misunderstood. It was never meant as a rigid law, and the man who created it now uses a higher figure. Here is what it actually says, what it assumes, and when you should not rely on it.
What does the 4% rule actually say?
The rule comes from research by financial planner William Bengen, who tested historical market data and found that a retiree who withdrew 4% of their portfolio in year one, then increased that dollar amount with inflation each year, would not run out of money over a 30-year retirement in any historical period he studied.1
On a $1 million portfolio, that means withdrawing $40,000 in year one, then adjusting that amount upward with inflation regardless of what the market does in any given year.
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Why did Bengen raise it to 4.7%?
Bengen's original work used a limited set of asset classes. With broader diversification across more asset types, his updated research concluded that a higher initial withdrawal rate, around 4.7%, would have survived the same historical stress tests.1
The takeaway is not that 4.7% is the new law. It is that the safe rate depends on your portfolio's diversification and the assumptions behind it. A well-diversified, stock-inclusive portfolio has historically supported a higher rate than a conservative, bond-heavy one.
When does the 4% rule break down?
The rule's biggest vulnerability is sequence-of-returns risk: a severe market drop in the first few years of retirement, while you are withdrawing, can damage a portfolio in a way it may not recover from, even if average returns over the full period are fine.2
The rule also assumes a 30-year horizon. Retiring at 55 may require a lower rate; retiring at 72 may safely support a higher one. And it assumes steady inflation-adjusted spending, whereas real retirees often spend more early and less later.
A more flexible approach
Many planners now favor a dynamic strategy: withdraw less in years after the market falls and more after it rises. This flexibility, even a willingness to trim discretionary spending in a down year, has a larger effect on portfolio survival than the precise starting percentage.
Frequently asked questions
Is the 4% rule still safe in 2026?
It remains a reasonable starting point, and its creator now uses about 4.7% with a diversified portfolio. But it is a historical guideline, not a guarantee, and the safe rate depends on your asset mix, your time horizon, and market timing.
How much can I withdraw from a $1 million portfolio?
Under the 4% rule, about $40,000 in the first year, adjusted for inflation thereafter. Using Bengen's updated 4.7% figure with a diversified portfolio, about $47,000 in year one. Your safe figure depends on your specific situation.
What is sequence-of-returns risk?
It is the danger that poor market returns early in retirement, combined with withdrawals, permanently damage a portfolio. It is why the first five years of retirement matter most and why holding some cash can help.
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Sources
- The 4% Rule and Updated Safe Withdrawal Research Morningstar. Origins of the 4% rule and William Bengen's updated higher safe-withdrawal estimate.
- Retirement Income and Withdrawal Strategies Fidelity Investments. Withdrawal-rate guidance and sequence-of-returns risk in early retirement.