The 4% Rule, Explained: Is It Still Safe in 2026?

The 4% rule is the most quoted number in retirement planning. It’s also one of the most misunderstood. Here’s what it really says.

Where it comes from

In 1994 financial planner William Bengen tested withdrawal rates against US market history going back to 1926. He found that a retiree who withdrew 4% of a stock-and-bond portfolio in year one, then raised that amount with inflation, never ran out of money within 30 years, even starting just before the worst markets on record.

In 1998 three professors at Trinity University ran a similar analysis, now known as the Trinity study, and reached similar conclusions for portfolios with at least half in stocks.

How it actually works

1. Year one: withdraw 4% of your starting balance. On $1,000,000, that’s $40,000.
2. Every year after: take last year’s amount plus inflation. If prices rose 3%, take $41,200.
3. Ignore the market when setting the amount. That’s what makes it simple, and what makes it rigid.

Flip it around and you get the 25x rule: to spend $40,000 a year, save $1,000,000.

What it assumes

• A 30-year retirement. Longer retirements need a lower rate.
• A mix of stocks and bonds, typically 50% to 75% stocks.
• No fees. A 1% advisory fee eats a quarter of a 4% withdrawal.
• US market history repeating itself.

How it holds up in simulation

We ran $1,000,000 through 2,000 simulated markets with our Monte Carlo calculator, assuming a 7% expected return, 15% yearly volatility and 3% inflation, over 30 years:

First-year withdrawal	Rate	Money lasted 30 years
$30,000	3%	92% of simulations
$35,000	3.5%	86%
$40,000	4%	77%
$45,000	4.5%	67%
$50,000	5%	56%

These odds are lower than US history because the simulation allows bad sequences history hasn’t produced, and 15% volatility describes an all-stock portfolio. That’s deliberate: it stress-tests beyond the past. Lower the volatility to model a stock-and-bond mix and the odds rise.

Making it safer

• Use 3.5% for retirements longer than 30 years.
• Add guardrails: cut spending by 10% after a bad year, raise it after a strong one.
• Keep a cash buffer of one to two years of spending so you don’t sell stocks after a crash.
• Delay Social Security to shrink the share of spending your portfolio must cover.

The 4% rule is a starting point for planning, not a promise. Run your own numbers in the Monte Carlo calculator and see how a half-point change moves your odds.