Use a complete retirement budget and separate essential costs from flexible spending.
$
%
4% is the classic rule; lower is more conservative.
%
%
Withdrawals grow each year to keep your spending power.
Annual Income
$0
First year, before inflation
Monthly Income
$0
First year, before inflation
Portfolio Lasts
—
With returns & inflation applied
Portfolio Balance During Retirement
My 4% Rule Plan — Financial Depth
financialdepth.com/4-percent-rule
Quick Summary (TL;DR)
- Annual income = portfolio × withdrawal rate. At 4%, a $1M portfolio = $40,000/year.
- The 4% rule = the flip side of needing 25× your expenses to retire.
- Whether your money lasts depends on real return vs. withdrawal rate — if real returns beat your rate, it can last indefinitely.
- Formula:
Annual = Portfolio × (Rate ÷ 100)
Understanding the 4% Rule
The 4% rule is the most quoted guideline in early retirement. It grew out of financial planner William Bengen's 1994 research and the later Trinity Study, which tested historical U.S. market data and found that withdrawing 4% of a portfolio in the first year — then adjusting that dollar amount for inflation each year after — survived almost every 30-year period without running out of money. Flip the math around and a 4% rate is the same as needing 25 times your annual expenses.
This calculator applies the rule two ways. First it computes your Annual Income = Portfolio × (Withdrawal Rate ÷ 100). Then it simulates retirement year by year: each year it removes your inflation-adjusted withdrawal, grows the remaining balance by your expected return, and repeats — so you can see whether the portfolio holds steady, grows, or slowly depletes.
Worked example: A $1,000,000 portfolio at 4% gives $40,000 in the first year, about $3,333/month. If it earns a 6% return against 3% inflation, the real return comfortably covers the withdrawals and the balance can last well beyond 30 years. Push the rate to 6%, though, and withdrawals begin to outrun growth — the portfolio depletes far sooner. Small changes in the rate have an outsized effect on how long your money lasts.
What the research actually says: 2.31% to 6%
There is no single safe withdrawal rate. Every figure below comes from a named study or a research house that publishes its assumptions — and they span nearly a threefold range. On a $1,000,000 portfolio that is the difference between $23,100 and $60,000 of first-year income. The spread is not disagreement about arithmetic; it is disagreement about which history you are allowed to assume repeats.
Note the two entries at 6%: the same rate draws opposite verdicts depending on whether spending is rigid or flexible. That, not arithmetic, is what the argument is really about. Press Apply on any row to load that rate into the calculator above and see it against your own numbers.
| Rate | What it is | What it assumes | |
|---|---|---|---|
| 2.31% | Global historical floor Anarkulova, Cederburg, O’Doherty & Sias (2025) | 38 developed countries, 1890–2019. A 65-year-old couple accepting a 5% chance of ruin. | |
| 3.0% | “Absolutely safe” Bengen (1994) | His own term. Portfolio longevity never below 50 years in any historical period (true up to about 3.5%). | |
| 3.3% | First Morningstar estimate Morningstar (2021) | Balanced portfolio, fixed real withdrawals, 30 years, 90% success. | |
| 3.7% | Morningstar, 2025 retirees Morningstar (2024 edition) | Same method, prior year’s capital market assumptions. | |
| 3.9% | Morningstar, 2026 retirees Morningstar (2025 edition) | 30 years, 30–50% equity, 90% success, excludes Social Security. Raised from 3.7% on improved assumptions. | |
| 4.0% | The original rule Bengen (1994) | Worst historical case still lasted 33 years; most cases 50+. Data through 1992, 50/50 portfolio. | |
| 4.25% | Where the margin thins Bengen (1994) | Could have exhausted a portfolio in as little as 28 years under past conditions. | |
| 5.0% | Bengen: “risky” Bengen (1994) | Retirees starting in the late 1960s / early 1970s might have had only 20 years of funds. | |
| 6.0% | With flexible spending Morningstar (2025 edition) | Morningstar’s wording is “nearly 6%”. Requires genuinely accepting real cuts in spending when markets fall. | |
| 6.0% | Bengen: “gambling” Bengen (1994) | His word. At 6% he counted more historical scenarios that failed than succeeded over 30 years. |
Bengen figures are quoted from the original 1994 Journal of Financial Planning article. Bengen later revised his own number upward — 4.5%, and subsequently 4.7%, after widening the asset mix — figures widely reported from his books and interviews rather than from the 1994 paper, so they are described here rather than tabulated.
Five things the original paper says that most summaries get wrong
The 1994 article is short, readable, and freely available. Reading it dissolves several beliefs that have accreted around it.
“Bengen recommended a 50/50 portfolio”
He used 50/50 to illustrate, then concluded the opposite: advisers should get clients to a stock allocation as close to 75% as possible, and in no case below 50%. He judged allocations under 50% and over 75% both counterproductive.
“The Great Depression was the worst case”
It ranked third. The 1973–74 recession was the most destructive because it came with high inflation. His conclusion: a deflationary crash is not the thing to fear — an inflationary one is, because it erodes purchasing power and portfolio value together.
“You withdraw 4% of the balance every year”
The percentage is used once, in year one. After that the dollar amount moves with inflation only, and is deliberately decoupled from what the portfolio is doing. A 4%-of-current-balance strategy is a different rule with different behaviour.
“4% is a safe round number”
The margin above it is thin. 4% never failed inside 33 years in his data — but 4.25% could have run dry in 28. Meanwhile he called 3% (and up to roughly 3.5%) the “absolutely safe” level, 5% “risky”, and 6% or more “gambling”.
“It is a rule”
The paper is a method, not a constant: pick the shortest portfolio life you can accept — he suggested life expectancy plus five to ten years — then read off the highest rate that survives it. Every input is meant to be replaced with your own. The number that came out for a 60–65-year-old in 1994 was about 4%.
The number is lower outside the United States
Every figure in the 4% lineage rests on twentieth-century American market data. That is a survivorship problem: the US was among the best-performing markets of that century, and a rule calibrated to the winner will flatter every other outcome.
The most direct test of this appeared in the Journal of Pension Economics and Finance in 2025. Using a dataset built to correct for survivor and “easy data” bias across 38 developed countries from 1890 to 2019, Anarkulova, Cederburg, O’Doherty and Sias found that a 65-year-old couple willing to accept a 5% chance of running out could withdraw just 2.31% a year — roughly half the conventional figure. An earlier working-paper version of the same study reported 2.26%; the published, peer-reviewed figure is 2.31%.
Two honest readings coexist. If you are a US retiree with a US-listed portfolio, the American record is arguably the relevant one. If you are retiring elsewhere, or you think the next century is not obliged to repeat the last American one, the global number is the more sober anchor. This calculator lets you hold both: run 3.9% and 2.31% side by side and see what changes.
Frequently Asked Questions
What is the 4% rule?+
It's a retirement guideline: withdraw 4% of your portfolio in year one, then adjust that dollar amount for inflation each year, with a strong historical chance the money lasts at least 30 years. It comes from William Bengen's research and the Trinity Study.
Is the 4% rule still safe today?+
It's a useful starting point, not a guarantee. It was based on historical U.S. data and can be strained by high valuations, low yields, or a poor sequence of returns early on. Many retirees use a slightly lower rate, stay flexible with spending, or revisit the plan regularly.
How long will my money last at a 4% withdrawal rate?+
It depends on your real (after-inflation) return. If real returns at least match your withdrawal rate, the balance can last indefinitely; if withdrawals outpace real growth, it depletes over time. This calculator simulates each year so you can see the crossover.
Key Considerations
- Sequence-of-returns risk is the silent killer. A crash in your first few retirement years forces selling at lows and can permanently impair the portfolio — the single biggest threat to the 4% rule.
- Valuations matter at the start. Retiring when markets are expensive (high CAPE) historically lowers the safe rate; some research (Early Retirement Now) favours 3–3.5% for very long or early retirements.
- Flexibility beats rigidity. "Guardrail" strategies — trimming spending in bad years, spending more in good ones — let many retirees safely start above 4%.
- It’s not set-and-forget. Taxes, healthcare, and inflation shocks all hit real spending; revisit your rate every few years.
Related Tools
FIRE Number Calculator →
Find the portfolio size you need to retire early.
Early Mortgage Payoff →
See the interest and years you save with extra payments.
Retire abroad →Why the rate arguably drops when your spending leaves the dollar.
Sources: William P. Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning 7(4): 171–180 (October 1994) — all Bengen figures and quoted terms on this page are taken from that article. Morningstar, State of Retirement Income (2025 edition, for 2026 retirees). Anarkulova, Cederburg, O’Doherty & Sias, “The safe withdrawal rate: evidence from a broad sample of developed markets,” Journal of Pension Economics and Finance 24(3): 464–500 (2025). Method and limitations: FinancialDepth methodology.
Decision guide
Use the 4% rule as a range, not a promise
A withdrawal rate converts a portfolio into first-year retirement income. The useful question is how results change at 3%, 3.5%, 4%, and 5% for your horizon, allocation, flexibility, and other income.
A lower rate supports a longer horizon but requires a larger portfolio or lower spending.
Social Security, pensions, and part-time work reduce what the portfolio must fund.
What this model includes
- First-year withdrawal income
- Portfolio longevity under selected assumptions
What to add outside the model
- Taxes, required distributions, and claiming choices
- Real sequence-of-returns variation unless explicitly modeled
Calculation standard: Formula details, source policy, tests, and limitations are documented in the FinancialDepth methodology. Reviewed July 18, 2026.