Short answer: the 4% rule says you can withdraw 4% of your savings in the first year of retirement, then raise that dollar amount with inflation every year, and the money should last 30 years. On $1,000,000 that is $40,000 in year one. Flip it around and you get the savings target: 25 times the yearly spending your portfolio has to cover.
We tested the rule ourselves on every 30-year retirement from 1928 to 2025, using real US stock, bond and inflation data. With 60% stocks and 40% bonds, 4% lasted in 65 of 69 periods. The four that ran out all began in the late 1960s, and they ran out in years 25–27, not in year 5. In most of the other periods the retiree died with more money than they started with.
That makes the rule a good starting point and a poor autopilot. Below are the numbers, the four retirements that failed, and the adjustments that make 4% safer.
Who this is for: anyone estimating how much they need to retire, or how much they can spend from a 401(k), IRA or brokerage account once they stop working. What it does not cover: taxes on withdrawals, annuities, and retirements much longer than 30 years (early retirees at 40 should read the section on that). Past returns do not guarantee future ones; nothing here is financial advice.
The ruleWhere 4% comes from
In 1994 financial planner William Bengen tested every historical retirement since 1926 and looked for the highest first-year withdrawal that never ran out over 30 years. The answer was about 4%. The 1998 "Trinity study" from three professors at Trinity University tested the same idea with different portfolios and came to a similar result.
The mechanics matter more than the number:
Year one: 4% of the starting balance
$1,000,000 → $40,000. This dollar figure, not the percentage, is what you carry forward.
Every year after: last year's dollars + inflation
Inflation at 3% → $41,200 in year two, whatever the market did. You do not recompute 4% of the new balance.
Keep the mix
Rebalance once a year back to the target — 60% stocks and 40% bonds in our test.
Plan for 30 years
The rule was built for a 30-year retirement. Longer needs a lower rate.
Our backtest69 retirements, 1928 to 2025
We ran a $1,000,000 portfolio through every 30-year period that has a complete history — starts from 1928 to 1996 — using annual S&P 500 returns with dividends, 10-year Treasury bond returns and CPI inflation. The withdrawal comes out at the start of each year.
100 / 0
- 3%
- 100%
- 3.5%
- 99%
- 4%
- 93%
- 4.5%
- 90%
- 5%
- 78%
75 / 25
- 3%
- 100%
- 3.5%
- 100%
- 4%
- 94%
- 4.5%
- 87%
- 5%
- 77%
60 / 40
- 3%
- 100%
- 3.5%
- 100%
- 4%
- 94%
- 4.5%
- 84%
- 5%
- 72%
50 / 50
- 3%
- 100%
- 3.5%
- 100%
- 4%
- 93%
- 4.5%
- 83%
- 5%
- 67%
25 / 75
- 3%
- 100%
- 3.5%
- 97%
- 4%
- 74%
- 4.5%
- 54%
- 5%
- 42%
| Stocks / bonds | 3% | 3.5% | 4% | 4.5% | 5% |
|---|---|---|---|---|---|
| 100 / 0 | 100% | 99% | 93% | 90% | 78% |
| 75 / 25 | 100% | 100% | 94% | 87% | 77% |
| 60 / 40 | 100% | 100% | 94% | 84% | 72% |
| 50 / 50 | 100% | 100% | 93% | 83% | 67% |
| 25 / 75 | 100% | 97% | 74% | 54% | 42% |
Source: CalculatorAI · calculatorai.app · Damodaran, NYU Stern, annual returns 1928–2025 · drafts/4-percent-rule-retirement-numbers.mjs
Three things stand out:
- The cliff is steep above 4%. At 60/40, going from 4% to 5% drops the success rate from 94% to 72%. A small change in spending makes a big change in risk.
- Bonds alone do not make it safe. The most conservative mix, 25% stocks, did worse at 4% than an all-stock portfolio. Over 30 years inflation is the bigger risk, and stocks are what outpace it. Our guide to asset allocation by age covers the right mix in retirement.
- The usual outcome is a surplus, not a shortfall. In 43 of the 65 periods that lasted, the portfolio ended with more than $1,000,000 in starting-year dollars. The median ending balance was about $1.64 million after inflation.
The failuresWhy 1966 was the worst year to retire
The 4% rule is set by the worst cases. The median start year could have withdrawn 6.49%; a 1966 retiree only 3.73%.
Show these figures as a table
| Value (% first-year withdrawal) | |
|---|---|
| 1966 — Worst | 3.73 |
| 1965 | 3.85 |
| 1968 | 3.9 |
| 1969 | 3.9 |
| Median | 6.49 |
| 1982 — Best | 10.3 |
Source: CalculatorAI · calculatorai.app · Damodaran annual returns · drafts/4-percent-rule-retirement-numbers.mjs
The late-1960s retirees did not suffer a single crash. They got sequence-of-returns risk at its worst: a flat, choppy stock market in their first decade combined with the 1970s inflation that pushed their withdrawals up by double digits a year. Spending rose while the portfolio stood still, so by the time the 1980s boom arrived there was too little left to recover. Our 1966 retiree ran out in year 25.
Compare 1929: the Great Crash came in the first years, yet the rule survived, because deflation in the early 1930s lowered the withdrawals. What hurts is high inflation plus weak returns early on — the first ten years decide most of the outcome.
In 2026Is 4% still safe?
Morningstar's 2026 State of Retirement Income report puts the highest safe starting rate for a new US retiree at 3.9%, for a 30-year retirement with a 90% chance of success — up from 3.7% a year earlier. Its forward-looking estimate is lower than history because stock valuations are high: the S&P 500 started 2026 near record levels. Bond yields help in the other direction: with 10-year Treasury yields between roughly 4% and 5% in 2026, bonds pay far more than they did when rates were near zero.
So the honest 2026 range is about 3.5% to 4% for a fixed, inflation-adjusted withdrawal — and higher if you are willing to adjust.
Make it saferFive adjustments that matter more than the rate
Spend less after a bad year
Skip the inflation raise in a year the portfolio fell — or cut spending 10% while it is below its starting value. Flexible rules like this are why many planners let flexible retirees start above 4%.
Delay Social Security
Each year you wait from 62 to 70 raises the benefit, and that income is inflation-adjusted for life. A bigger guaranteed check means less has to come from the portfolio.
Hold a cash buffer
One to two years of withdrawals in cash or short Treasuries lets you avoid selling stocks in a crash during the first decade — the period that decides most outcomes.
Rebalance every year
Sell what rose, top up what fell. It forces the portfolio to buy low during a bad sequence. See how often to rebalance.
Use 3–3.5% for a long retirement
Retiring at 45 means planning for 45–50 years. In our data 3.5% lasted in every 30-year period; for longer retirements, start around 3–3.5%.
Your numberTurn the rule into a savings target
The formula works for any budget: subtract guaranteed income (Social Security, a pension) from the yearly spending you expect in retirement, then multiply what is left by 25 — or by about 28.6 if you want to plan at 3.5%.
$30,000
- Needed at 4%
- $750,000
- Needed at 3.5%
- $857,143
$40,000
- Needed at 4%
- $1,000,000
- Needed at 3.5%
- $1,142,857
$60,000
- Needed at 4%
- $1,500,000
- Needed at 3.5%
- $1,714,286
$80,000
- Needed at 4%
- $2,000,000
- Needed at 3.5%
- $2,285,714
| From the portfolio, per year | Needed at 4% | Needed at 3.5% |
|---|---|---|
| $30,000 | $750,000 | $857,143 |
| $40,000 | $1,000,000 | $1,142,857 |
| $60,000 | $1,500,000 | $1,714,286 |
| $80,000 | $2,000,000 | $2,285,714 |
Source: CalculatorAI · calculatorai.app · 25× at 4%, 28.6× at 3.5% · drafts/4-percent-rule-retirement-numbers.mjs
A couple spending $70,000 a year with $30,000 of combined Social Security needs the portfolio to cover $40,000 — about $1 million at 4%. The retirement calculator projects whether your current savings and contributions get you there, the 401(k) calculator shows what the employer match adds, and the Net Worth Tracker follows the total across every account as it grows. For where you stand against others your age, see median net worth by age.
Where these numbers come from
- Returns: annual S&P 500 total returns (with dividends), 10-year US Treasury bond returns and CPI inflation, 1928–2025, from Aswath Damodaran's Historical Returns on Stocks, Bonds and Bills (NYU Stern, file updated August 2026).
- Method: $1,000,000 start; the first withdrawal taken at the start of the first year; withdrawals raised each year by that year's inflation; portfolio rebalanced annually; no fees or taxes. A period "lasts" if the balance never hits zero in 30 years. 69 complete periods start from 1928 through 1996.
- Differences from Bengen: he used intermediate-term government bonds and a slightly different window, which is why his worst case was about 4.15% and ours, with 10-year Treasuries, is 3.73%. The conclusion is the same.
- Arithmetic is in
drafts/4-percent-rule-retirement-numbers.mjs, which asserts the survival table, the four failing years, the 3.73%/6.49%/10.27% rates and the 43-of-65 surplus count. - 2026 outlook: Morningstar, The State of Retirement Income for 2026 (3.9% base case, 30 years, 90% success).
- Limits: US data only, one history, no fees or taxes — any fee comes straight out of what you can safely spend.
FAQFrequently asked questions
What is the 4% rule in simple terms?
Withdraw 4% of your savings in your first year of retirement, then increase that dollar amount by inflation each year. Historically that lasted at least 30 years in most US market periods.
How much do I need to retire with the 4% rule?
25 times the yearly spending your savings must cover. If you need $40,000 a year on top of Social Security, the target is $1,000,000.
Is the 4% rule still valid in 2026?
As a starting point, yes. Morningstar's 2026 estimate is 3.9% for a fixed withdrawal over 30 years. In our backtest of 1928–2025, 4% with a 60/40 portfolio lasted in 65 of 69 periods and 3.5% lasted in all of them.
Does the 4% rule work for early retirement?
It was designed for 30 years. For 40–50 years, most research points to 3–3.5%, plus the willingness to spend less after bad years.
Do I withdraw 4% of my balance every year?
No — that is a different, variable method. The 4% rule fixes the first-year dollar amount and only adjusts it for inflation, regardless of the balance.
What happens if the market crashes right after I retire?
That is the main risk (sequence of returns). It is survivable: the 1929 and 1973 retirees in our data made it. A cash buffer and spending cuts in down years improve the odds.
The takeaway25× is the target, flexibility is the safety net
The 4% rule gets the order of magnitude right: save 25 times what your portfolio must pay you each year. History says a fixed 4% usually leaves money over, sometimes runs short after 25 years, and works best with a balanced portfolio and a willingness to tighten in bad years. Put your own numbers into the retirement calculator and see how far you are from yours.
