Time to Rethink the Retirement Math?

When Bill Bengen introduced the now-famous “4% rule” in 1994, it quickly became one of the most cited formulas in retirement planning. The idea was simple: withdraw 4% of your portfolio in your first year of retirement, adjust for inflation, and odds were good you wouldn’t run out of money for at least 30 years.

But Bengen, now 77, recently revisited his own research — and says that original rule may have been too conservative. After what he calls an “aha moment”, he now believes retirees may be able to safely spend more each year than previously thought.

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—The Money Pickle Team

The New (Old) Math

Bengen’s latest analysis lifts his original estimate from 4% to 4.7%, even when accounting for historical worst-case retirement scenarios. In fact, in studying nearly 400 sample retirement paths, he found the average safe withdrawal rate was closer to 7%.

So what changed? Bengen shifted his focus from stock returns to inflation as the primary risk factor, and also modeled more diversified portfolios than in his original study. Those updates allowed him to better capture how different market environments might impact retirement outcomes.

In today’s relatively moderate inflation environment, Bengen estimates that a withdrawal rate between 5.25% and 5.5% could still be sustainable for many retirees over a 30-year window. To be sure, that’s not a recommendation, just a data point. But it does suggest there may be more flexibility than some assume.

Why It Matters

Bengen himself followed a conservative 4.5% drawdown strategy when he retired in 2013, only to realize later that he could have spent more comfortably. His concern is that many retirees may reach the end of life with more regrets than withdrawals, having underspent out of fear.

Of course, these rules of thumb aren’t personalized advice. Retirement success still depends on a range of factors: your health, lifestyle, market conditions, and how long you’ll need your savings to last. But this new research opens the door to rethinking what’s possible.

🥒 Pickle Tip:

Sometimes, playing it too safe may mean missing out. If you’re unsure whether your plan is too tight or too loose, getting a second opinion can offer clarity, without the guesswork.

🌟 Final Thought

Rules of thumb are great starting points, but your retirement deserves a personalized map. If you’re curious how your withdrawal strategy stacks up, a quick conversation with an advisor in the Money Pickle network could help you explore your options with confidence.

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