The 4% rule creator reveals the new safe retirement withdrawal rate

Sun, Mar 16, 2025, 11:00 AM 9 min read

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In 1994, Bill Bengen published groundbreaking research that reshaped the way retirees approach their income planning. He introduced the 4% rule, which suggests that retirees can safely withdraw 4% of their portfolio in the first year of retirement and then adjust that amount annually for inflation.

This strategy is designed to help retirees sustain their savings and avoid running out of money over a 30-year retirement.

Thirty-one years later, Bengen — whose upcoming book, "A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More," is set to be published later this year — now believes retirees can safely withdraw 4.7% of their portfolio in the first year of retirement, up from his original 4% rule, while still ensuring their savings last for 30 years.

However, before retirees blindly follow Bengen’s rule of thumb, he outlined in a recent episode of Decoding Retirement the eight key factors to consider when crafting a retirement income plan.

"A lot of folks get hung up immediately at the start with, what's my number? Is it 4%? Is it 5%?" Bengen said (see video above or listen below). "And there's a lot of things you have to look at before you can get to that point.”

Read more: What is the retirement age for Social Security, 401(k), and IRA withdrawals?

The first step in developing your personal retirement withdrawal plan is to select a scheme for withdrawing your money.

Most people don’t realize that the 4% rule — now upgraded to 4.7% — is based on a specific mathematical approach for withdrawing money in retirement that accounts for severe market downturns early in retirement, as well as historically high inflation periods, Bengen said. Under this rule, a retiree with a $1 million IRA would withdraw 4.7% in the first year, or $47,000.

After that, Bengen said the percentage is no longer used. Instead, withdrawals are adjusted annually based on inflation, much like Social Security. For example, if inflation were 10%, the next year’s withdrawal would increase by 10%.

This method, Bengen said, aims to maintain a retiree’s purchasing power over time. However, it’s just one of many approaches. Other strategies include withdrawing a fixed percentage of assets, using annuities, or front-loading spending in early retirement and cutting back after about 10 years. And each approach has different financial implications, he said.

The second factor is determining your "planning horizon," Bengen said. This is one of the most challenging aspects of developing a withdrawal plan, as it's directly linked to your life expectancy as an individual and, if applicable, as a couple.