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Of all the Retirement Rules of Thumb discussed over the decades I’ve spent writing about investing and Retirement, few are more ubiquitous than financial planner William Bengen’s famous 4% Rule, which is his rough estimate of the annual percentage of a portfolio that can safely be withdrawn each year without causing your retirement nest egg to run out of money in old age (adjusted for inflation.) While he has more recently updated it to a slightly higher 4.7%, the “Rule” continues to fascinate and sometimes provoke financial advisors, retirement gurus and media pundits.
Indeed, the past weekend in the Motley Fool Hidden Gems Investing podcast, regular TMF Retirement contributor Robert Brokamp rebroadcast an earlier interview with Bengen, titled “The Father of the 4% Rule says Retirees can take out much more.”
I have written on this topic more than once; most recently late last year in my MoneySense Retired Money column: Experts opine on various tweaks to Bengen’s famous 4% Rule.
Below, we asked various North American advisors, business owners and other experts to weigh in via Linked In and Connectively (formerly Featured.)
Here’s how the question was posed earlier this month on Connectively:
What is your view of William Bengen’s famous 4% Rule, which he seems to have adjusted up to about 4.7%? Are either of these realistic percentage gains, or are they too optimistic or too pessimistic? If you have clients of varying ages (from Gen Z to retired Boomers), did any religiously cleave to this Rule or is it just a starting point around which specific investment objectives were overlaid?
As usual, we have only lightly edited the responses which appear more or less intact, complete with author picture, title and links to their respective web sites. The subheadings are either direct quotes from their input (indicated in quotation marks) or slightly edited variations of quotes.
“The Rule works as a conversation starter, not a finish line.”
Bengen’s rule is a solid anchor, not a contract. I’ve worked with retired clients who treated 4% as gospel and ended up leaving significant money on the table because they were terrified to spend: even when markets had doubled their portfolio.
The honest answer is that the “right” number depends entirely on sequence-of-returns risk, tax drag, and spending flexibility. A Boomer pulling from a traditional IRA faces a very different math than a Gen Z client with decades of Roth compounding ahead. Same percentage, completely different outcome.
Where I’ve seen the rule actually help is as a conversation starter, not a finish line. One business owner client near Crown Point was fixated on hitting a magic retirement number. When we layered in tax-efficient withdrawal sequencing — mixing taxable, traditional, and Roth accounts — their sustainable spending rate shifted meaningfully without touching the portfolio risk profile at all.
The Bengen rule also assumes relatively static spending, which almost no one has. Clients in their early retirement years typically spend more on travel and experiences, then spending drops mid-retirement, then healthcare costs spike late. A single fixed percentage ignores that entire curve. A living financial plan accounts for it. — Daniel Delaney, Owner, Seek & Find Financial
A useful mental anchor but don’t treat it like gospel
The 4% Rule is a useful mental anchor, but treating it as gospel is like using a map from 1994 to navigate a city that’s been rebuilt three times since. Bengen’s original research was groundbreaking for its era. It gave people a simple number to hold on to. But the world it modeled — steady bond yields, predictable inflation corridors, a relatively stable geopolitical backdrop — that world doesn’t fully exist anymore.
Here’s how I think about it. The 4% Rule assumes you’re a passive participant in your own financial life. You retire, you draw down, you hope the math holds for 30 years. That framing made sense when most people had one career, one pension, and one plan. Today, the most financially resilient people I know, from Gen Z creators to semi-retired Boomers, don’t think in terms of a single withdrawal rate. They think in terms of optionality.
I’ll give you a real example. A former VC CFO I spoke with last year told me he stopped thinking about the 4% Rule entirely when he realized his “retirement” would include three or four income-generating projects running simultaneously, most of them enabled by AI tools that didn’t exist five years ago. His withdrawal rate fluctuates between 2% and 6% depending on what’s producing cash flow in a given quarter. The rule became irrelevant because his income never fully turned off.
Bengen adjusting to 4.7% reflects updated data, but it still operates inside the old paradigm: accumulate, then deplete. For younger generations, the line between accumulation and distribution is blurring completely. A 28-year-old building a side business with AI isn’t thinking about safe withdrawal rates. They’re thinking about how to make their capital work alongside earned income indefinitely.
So is 4% too optimistic or pessimistic? Neither. It’s just incomplete. The better question isn’t “what percentage can I safely withdraw?” It’s “how do I build a life where I’m never fully dependent on withdrawals alone?” That reframe changes everything. — Runbo Li, Cofounder and CEO, Magic Hour AI
GenZ and Millennials ignore it completely
I view the 4% Rule as more of an idea to explore, not something carved in stone, and the 4.7% update is essentially Bengen coming clean about what many of us already say: One number will not make it through intact after meeting real-world markets, tax brackets, and spending needs. It is those Boomers taking 4% as their gospel and panic selling in a tough year or, worse, never adjusting for a tough sequence of returns early on during retirement where I have seen people make their biggest mistakes. On the other hand, my Gen Z and Millennial audience members ignore it completely because they are decades away, and they have much better control over income right now through negotiation or side work such as surveys and focus groups than by worrying about a withdrawal rate that is years away from being used. In my opinion, use 4% as a quick and dirty check and build yourself a withdrawal range based on your own individual circumstances. — Scott Brown, Founder, MintWit
“Real life rarely matches the assumptions behind any single retirement rule.”
From my perspective, the 4% Rule has always been more useful as a planning framework than a guarantee. Whether someone uses the original 4% guideline or William Bengen’s later research suggesting that a higher starting withdrawal rate may have been sustainable under certain historical conditions, I don’t think either figure should be treated as universally correct.
I’ve worked with business owners and professionals at different stages of their careers, and one thing stands out: real life rarely matches the assumptions behind any single retirement rule. Markets change, spending isn’t static, people retire at different ages, and unexpected expenses inevitably arise.
That’s why I encourage people to use the rule as a starting point rather than a destination.
For younger professionals, including many entrepreneurs, the conversation is usually less about withdrawal rates and more about building assets, increasing income, and creating flexibility. For those nearing retirement, the focus shifts toward sustainable income, but I still don’t recommend relying on one fixed percentage alone.
I’ve also noticed that financially disciplined people tend to adjust their withdrawals based on market conditions instead of following the exact same rate every year. They’re willing to spend a little less after a difficult market and a little more when their portfolio performs well.
As a founder, I appreciate simple financial frameworks because they help people begin planning, but they shouldn’t replace individualized decision-making.
If I were advising someone, I’d say the 4% Rule — or even 4.7% — is a reasonable benchmark, not a promise. The more important questions are: How long does your money need to last? How much flexibility do you have in your spending? What’s your investment mix, and how comfortable are you with market volatility?
In my experience, successful retirement planning isn’t about finding the perfect withdrawal percentage. It’s about creating a strategy that can adapt as your life and the markets inevitably change. — Max Shak, Founder/CEO, nerD AI
The Rule is “a stress-test starting point, not a spending command.”
The first clarification is that 4% or 4.7% is a withdrawal rate, not an expected investment gain. Under the original approach, a retiree withdraws that percentage of the starting portfolio in year one and then adjusts the dollar amount for inflation.
For a $1 million portfolio, the difference between 4% and 4.7% is $7,000 in the first year: $40,000 versus $47,000. That difference may look modest, but it becomes important when retirement begins before a major market decline or period of high inflation.
I treat either figure as a stress-test starting point, not a spending command. The appropriate plan depends on retirement length, taxes, fees, portfolio composition, pension or Social Security income, essential spending and the retiree’s willingness to reduce withdrawals after weak markets. A person retiring in their forties should not automatically use the same assumption as someone retiring at seventy with reliable pension income.
I do not have U.S. retirement-advisory clients, but my finance approach is to model several scenarios rather than rely religiously on one percentage. The safer plan is usually one that protects essential spending, keeps a separate reserve and allows discretionary withdrawals to adjust when markets or inflation behave badly. — Cem Oner, Founder / Finance & Public Data Publisher, hesapcebimde.com
If you are underweight equities or neglect rebalancing, “a fixed 4 per cent can be too optimistic; with disciplined equity exposure and regular rebalancing it is more attainable.”
I view William Bengen’s 4% rule as a useful planning baseline but not a fixed rule for every retiree. It provides a clear starting point for estimating sustainable withdrawals, but its realism depends on factors I see often in client portfolios, such as asset allocation, rebalancing habits, and savings adequacy. When investors are underweight equities or neglect rebalancing, a fixed 4 percent can be too optimistic; with disciplined equity exposure and regular rebalancing it is more attainable. Very few clients strictly adhere to a single percentage in my experience. Instead, the rule is typically used as an initial benchmark onto which specific investment objectives and cash flow needs are overlaid. I therefore advise starting with the 4 percent figure, conducting a full portfolio audit, and automating contributions and rebalancing to align the plan with individual goals. — Amir Husen, Content Writer, SEO Specialist & Associate, ICS Legal
Financial Advice should not be based on a single Rate of Return
Looking back at my over two decades of experience working with financial companies to boost their Internet presence, one thing I’ve learned is that guidelines like the 4% rule are so well-known because they’re easy to remember. The problem here is that most people confuse headlines or popular guidelines as a reasonable solution for their retirement. Whether they’re talking about 4%, or William Bengen’s idea around 4.7%, in some circumstances, I would consider those as opening lines of discussion.
Highly trusted financial institutions do not base their advice on a single rate of return. Financial institutions provide interpretation of the assumptions made regarding rate of return and customize advice according to retirement age, required income, taxes, health care expenses and other sources of income.
From my perspective, good financial advice doesn’t make any promises about guarantees. This allows one to realize the reasons why a certain rule may be wrong and to start a conversation with an expert in this field. A notable percentage may help clarify a complex idea, but good retirement strategies are always based on flexibility. — Derek Iwasiuk, Co-owner, Director of marketing, Searchtides
It all depends on Sequence of Returns, which is out of your control
The 4% Rule works fine as a starting number. That’s why most people accept it as a default. But you shouldn’t consider it a guarantee. Just guidance, not prescriptive one. The rule works only within the confines of the assumptions used to create it. Bengen wasn’t using an average of the stock and bond market returns. He used one specific period in the market and one very particular mix of assets.
The 4.7% rule is similar, only it uses slightly different numbers. When looking to live off your investments for the rest of your life, can you really go wrong using either number? It depends on the sequence of returns, which is completely out of your control. Continue Reading…
