The Creator of the 4% Rule for Retirement Savings Wants You to Spend More

 

The Creator of the 4% Rule for Retirement Savings Wants You to Spend More

## Introduction: The Permission Slip You've Been Waiting For

For over three decades, the 4% rule has been the gold standard of retirement planning. It's the number that gave millions of Americans permission to stop working and start living. Withdraw 4% of your portfolio in year one, adjust for inflation each year after, and your nest egg should last 30 years. Simple. Memorable. Safe.

But here's the thing: the man who invented it says you've been spending too little.

Bill Bengen, the financial advisor-turned-researcher who published his groundbreaking findings in 1994, has spent the last three decades refining his work. And his latest conclusion is one that retirees desperately need to hear: **You can afford to spend more**.

In a series of recent interviews and his new book *A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More*, Bengen has delivered a message that flies in the face of conventional financial anxiety. His updated "SafeMax" withdrawal rate is now **4.7%**—and for many retirees, he believes **5.5%** is entirely realistic.

This isn't just a minor tweak to a formula. It's a fundamental reassessment of how Americans think about retirement, risk, and the very purpose of saving.

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## What the 4% Rule Actually Is (And Isn't)

Before we dive into Bengen's updates, let's clear up a massive misconception that's been costing retirees their quality of life.

### The Rule Was Never a Rule

The 4% rule is ubiquitous in personal finance, but Bengen never intended it to be a one-size-fits-all solution.

"It's actually a rule that only applies for a very narrow segment of the population in practice," Bengen told Retirement Upside recently. "I never intended it to be a panacea for 'safe' retirement income planning, but that's kind of what it's become".

The original rule was designed for the **ultra-conservative** person who wants to be prepared for the worst that history has delivered. It assumes you retired at the absolute worst possible moment in modern market history—think 1968, when high inflation and stagnant stock returns created a perfect storm.

### How the Math Actually Works

Here's what many retirees get wrong: the 4% withdrawal rate applies **only to the first year** of retirement. You then adjust that dollar amount for inflation every year after that—similar to how Social Security gets a cost-of-living adjustment.

It does *not* mean you withdraw exactly 4% of your portfolio's current value every year. That's a different strategy entirely, and it would leave you with wildly fluctuating income.

Bengen's research analyzed rolling 30-year market periods to determine the maximum sustainable withdrawal rate that would last a retiree at least 30 years. Among more than 400 scenarios, he identified the worst-case one—someone who retired in 1968—where the safe withdrawal rate was only 4.2%. He rounded down to 4% for safety.

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## The Big Update: Why Bengen Now Says 4.7% (And Sometimes 5.5%)

So what changed? Several factors have led Bengen to revise his number upward.

### 1. More Sophisticated Research

Thirty years ago, Bengen's research focused on a simple 50/50 portfolio of U.S. government bonds and large-company stocks. Today, he works with a broader investment portfolio that includes stocks for large, medium, and small companies, international stocks, bonds, and Treasury bills.

"I'm up to seven asset classes now," he told USA Today.

His calculations now assume a slightly less conservative mix of 55% stocks, 40% bonds, and 5% cash. This broader diversification, coupled with strong stock performance in recent years, changed the math. The primary reason for the change is that his research has gotten more sophisticated.

### 2. Above-Average Stock Returns

The stock market has performed exceptionally well over the past decade. This has given investors more cushion in retirement. Bengen has updated his calculations to reflect this reality.

In fact, when Bengen himself retired in 2013, he followed an updated version of his rule, spending 4.5% of his savings in the first year. "And that turned out to be too conservative," he said. "Because the stock market has done so well, I've been able to adjust upwards." He's now spending **4.9%** a year.

### 3. The New SafeMax: 4.7%

Bengen now calls his updated figure the "Universal SafeMax"—the historical maximum safe withdrawal rate for all retirees. At 4.7%, it's a significant upgrade from the original 4%.

But here's the truly eye-opening part: Bengen says even 4.7% is still conservative for most people.

"Based on current market conditions, I think 5.5% is a more realistic withdrawal rate," Bengen said in a recent interview. "I wouldn't use 4.7% as a starting point".

In his book, he goes even further, writing that "a SafeMax of 5.25% to 5.5% seems like a reasonable, conservative estimate for current retirees".

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## The Real Problem: Fear of Running Out of Money (FOROM)

So if the numbers support higher spending, why aren't retirees spending more?

### The Psychology of Underspending

Bengen has a name for the anxiety that drives this behavior: **FOROM**, or Fear of Running Out of Money.

"It dominates their philosophy in retirement, and therefore, they'll just simply spend a lot less than they could, which to me is a real shame because they spent all these years saving and sacrificing, and I think they should be able to get the maximum possible out of it," Bengen said.

This isn't just anecdotal. According to an Employee Benefit Research Institute study published in June, about one-third of retirees in their mid-80s still have all of—if not more than—the original sum of money in their accounts when they first retired.

### The Opportunity Cost of Caution

Statistician Stefan Sharkansky, whose research recently caught Bengen's attention, found that following the 4% rule could lead to your portfolio **growing**—not shrinking—by 50% over a 30-year retirement in a median market scenario.

"That means you are not spending as much as you could, and you are leaving so much on the table for your heirs that you're not able to enjoy the quality of life in retirement that you can truly afford," Sharkansky told Morningstar.

Sharkansky is a strong advocate of "giving with a warm hand"—making gifts to charity and family while you're still alive instead of waiting until the end of your life.

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## Beyond the 4% Rule: What Really Determines Your Withdrawal Rate

Bengen emphasizes that there's no one-size-fits-all number. In his book, he outlines **ten variables** that determine a safe withdrawal plan.

### What You Can Control

- **Your withdrawal scheme** (the rules by which you plan to withdraw)

- **Asset allocation** (how your money is invested)

- **Retirement time horizon** (how long you expect to need income)

- **Legacy goals** (whether you want to leave money to heirs)

- **Tax strategy** (whether you have taxable or non-taxable assets)

- **Rebalancing frequency** (how often you reset your portfolio to target weightings)

### What You Can't Control

- **Stock market valuation** (higher valuations generally mean lower withdrawal rates)

- **Inflation** (which Bengen calls the "greatest enemy of retirees")

### The Flexible Approach

Bengen is a fan of the **Guyton-Klinger (G-K) Decision Rules**, a flexible withdrawal strategy that adjusts spending up or down based on portfolio performance.

Under this approach, retirees can start with a significantly higher withdrawal rate. Bengen's analysis found that the G-K method produces an average maximum safe starting withdrawal rate of **9.6%**—far higher than anything he's encountered with a conventional cost-of-living adjustment strategy.

There's a catch: the cumulative real withdrawals over the entire retirement period are generally lower with G-K compared to the traditional inflation-adjustment strategy. You get more money upfront but potentially less overall. Bengen says this approach could work well for retirees who value higher income early in retirement.

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## The Critics: Why Some Experts Still Say 4% (Or Even Less)

Not everyone agrees with Bengen's more optimistic numbers. The debate among retirement experts is real and ongoing.

### Ben Felix: The 3.5% Alternative

PWL Capital chief investment officer Ben Felix has drawn attention with research suggesting that for a globally diversified portfolio, a **3.5%** withdrawal rate is the safer approach.

Felix argues that while Bengen's research focused on a 50/50 portfolio of U.S. stocks and bonds, his own backtesting with global equities shows a 17.4% failure rate for the 4% rule versus only a 5% failure rate for 3.5%.

His numbers shift based on time horizon. For a 20-year retirement, a 4.4% withdrawal rate might be safe. For a 40-year early retirement, the safe rate drops significantly. This is especially relevant for the FIRE (Financial Independence, Retire Early) community.

### Morningstar's Conservative Stance

Morningstar's annual State of Retirement study has adjusted its safe withdrawal target multiple times over the years. In 2026, their number sits at just **3.9%**.

This contrast—Bengen at 5.5% versus Morningstar at 3.9%—illustrates the fundamental tension in retirement planning: do you plan for the **worst-case scenario** or the **average scenario**?

### The 4% Rule's Structural Weaknesses

Critics also point out that the 4% rule was built for a very different market environment:

**Bond Yields Are Lower**: When Bengen ran his numbers in 1994, 10-year Treasury bonds paid close to 8%. Today, they're around 4.5%. That matters because bonds used to provide a steady cushion in the portfolio. Now that income is much lower.

**Inflation Is Higher**: Consumer prices rose 4.2% over the 12 months ending in May 2026. The 4% rule assumes inflation stays relatively steady and manageable. When inflation runs hotter for longer, those annual increases pile up faster than the original model was built to handle.

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## Actionable Advice: How to Apply Bengen's Updates to Your Own Retirement

So what should you actually do with this information? Here's how to put Bengen's research into practice.

### 1. Run Your Own Numbers

Bengen's updated tables in *A Richer Retirement* help you estimate your personal SafeMax. To gauge your rate, you need to estimate:

- Your expected average inflation rate for early retirement

- The expected Shiller CAPE ratio (a measure of stock market valuation that takes inflation-adjusted earnings into account)

Higher inflation and higher valuations both point to **lower** sustainable withdrawal rates. This is why Bengen emphasizes that each individual has their own SafeMax based on the circumstances at the time they retire.

### 2. Consider Your Time Horizon

Bengen notes that the withdrawal rate is very sensitive to your planning horizon. For a 30-year horizon, 4.7% is the associated withdrawal rate. For a 10-year horizon, the rate could be around 8%.

For **early retirees** planning for 50 or 60 more years of life, Bengen recommends sticking closer to the conservative 4.2% rate.

### 3. Don't Ignore the Sequence of Returns Risk

One of Bengen's most important findings: **the first 10 to 12 years of retirement cast the die** for your entire retirement plan.

If you encounter a bear market early in retirement, your portfolio drops, and you never really catch up. Those early stock market declines reduce your safe withdrawal rate very significantly.

Bengen suggests being cautious in the first decade and then potentially increasing spending after the "smoke clears".

### 4. Be Flexible

Perhaps Bengen's most important advice: **be willing to adjust**. Most retirees naturally cut back spending when their portfolio is under stress and increase spending when it's performing well.

"I think it makes sense if your portfolio is under stress due to inflation or a bear market, that you want to take a cautious stance, cut back a little bit on spending temporarily, at least, and just wait and see how bad the situation becomes," Bengen said.

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## Frequently Asked Questions

### 1. What exactly is the 4% rule for retirement savings?

The 4% rule is a retirement withdrawal guideline developed by Bill Bengen in 1994. It suggests that retirees can withdraw 4% of their portfolio in the first year of retirement, then adjust that dollar amount for inflation each subsequent year. Based on historical data, following this rule should allow a portfolio to last at least 30 years.

### 2. Why does Bill Bengen now say retirees can spend more?

Bengen has updated his research to reflect broader diversification across seven asset classes (rather than the original 50/50 stock-bond split) and above-average stock market returns in recent years. His new "Universal SafeMax" is 4.7%, and he believes many retirees can safely withdraw 5.5% under current market conditions.

### 3. What is the difference between the 4% rule and the 4.7% rule?

The difference is simple: under the updated version, you withdraw 4.7% of your portfolio in year one instead of 4%, and adjust that dollar amount for inflation each year after. On a $1 million portfolio, that means $47,000 in year one instead of $40,000—a $7,000 increase in annual income.

### 4. Why do some experts say the 4% rule is too aggressive?

Critics like Morningstar and Ben Felix argue that lower bond yields, higher inflation, and the need for global diversification mean the 4% rule may no longer be safe for future retirees. Morningstar's 2026 estimate is 3.9%, while Felix advocates for 3.5% with a globally diversified portfolio.

### 5. Can I use the 4% rule if I plan to retire early (before age 65)?

Bengen recommends a more conservative approach for early retirees. If you're planning for a 50- or 60-year retirement, you should stick closer to the original 4% or even 4.2%. The longer your retirement horizon, the lower your safe withdrawal rate.

### 6. How does inflation affect my withdrawal rate?

Inflation is the "greatest enemy of retirees," according to Bengen. Higher inflation erodes purchasing power and requires lower withdrawal rates to maintain portfolio longevity. Bengen's research shows that the higher the inflation rate, the lower the safe withdrawal rate.

### 7. What is FOROM and why does it matter?

FOROM stands for Fear of Running Out of Money. It's a psychological condition where retirees spend significantly less than they can afford because they're afraid their savings will run dry. Research shows about one-third of retirees in their mid-80s still have all or more of their original retirement savings, indicating they could have spent more.

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## Conclusion: Spend More, Live More

Bill Bengen's message is clear: if you've been following the 4% rule to the letter, you're probably leaving money—and experiences—on the table.

The creator of the most famous retirement rule in history wants you to spend more. Not recklessly, but thoughtfully. Not because he's a spendthrift or a gambling man, but because the math supports it.

The original 4% rule was designed for the absolute worst-case scenario in modern market history. It was never meant to be a universal spending target. Bengen's updated research shows that most retirees can safely spend significantly more—and many *should*.

This isn't just about money. It's about what money is *for*. You spent decades saving and sacrificing. You delayed gratification, made tough choices, and built a nest egg that could support your dreams. Now, Bengen is giving you permission to actually enjoy the fruits of that labor.

The fear of running out of money is real, and it's powerful. But as Bengen's research shows, that fear often leads to a life of unnecessary deprivation. You don't need to take reckless risks—but you do need to be honest with yourself about what your savings can actually support.

So run the numbers. Consider your personal situation. And if the math works, give yourself permission to spend more.

You've earned it.

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## Disclaimer

*This article is for informational and educational purposes only and does not constitute financial, tax, or legal advice. Retirement planning involves significant personal, financial, and market risks. The withdrawal rates and strategies discussed are based on historical data and research, which does not guarantee future results. Individual circumstances—including investment returns, inflation, longevity, healthcare costs, and tax implications—can vary widely. Before making any changes to your retirement withdrawal strategy, please consult with a qualified financial advisor or tax professional who can evaluate your specific situation. The author does not endorse any particular investment strategy or financial product mentioned in this article. Past performance is not indicative of future results.*