Income Planning · 8 min read
Is the 4% Rule Dead? Why the 2026 Research Lands Between 3.9% and 4.7%
No. The 4% rule sits inside the range current research supports. Morningstar’s December 2025 study puts a starting withdrawal rate with a 90 percent chance of lasting 30 years at 3.9 percent for 2026 retirees; William Bengen’s 2025 update puts the historical worst case at 4.7 percent. The two answer different questions.
The 4% rule is pronounced dead every few years, usually by one headline arguing it is too generous and another arguing it is too timid. Both sides can cite serious work, because the two most-quoted current figures differ: 3.9 percent and 4.7 percent. We think the more useful question is not which figure wins but what each one measures. Once that is clear, the rule reads less like a verdict and more like one reference point inside a larger income plan.
What follows is educational. It is not a withdrawal rate for any particular household.
What “Is the 4% Rule Dead?” Is Really Asking
Behind the headline sit three narrower questions:
- Is 4 percent still supported by the research? A question about published numbers.
- Why do careful researchers publish different numbers? A question about method.
- Does the starting rate decide whether a retirement works? A question about what else matters.
The first has a short answer. The second and third explain it.
What the Rule Actually Says
William Bengen introduced the rule in 1994 using U.S. market data back to 1926. It is often misstated. The rule is to withdraw 4 percent of the portfolio’s starting value in the first year, then raise that dollar amount by inflation each year, regardless of what the balance does. It is not 4 percent of each year’s balance. Following that approach with a diversified portfolio, a retiree would have made it through every 30-year period in the historical record, including those that started at the worst possible moments.
Two Research Programs, Two Different Questions
The 2026 range comes from two bodies of work that set up the problem differently: (Morningstar, December 2025; Advisor Perspectives, August 2025)
| Morningstar, December 2025 | Bengen, August 2025 update | |
|---|---|---|
| Starting rate | 3.9% | 4.7% |
| Question asked | Which starting rate has a 90% probability of lasting 30 years? | Which starting rate survived the worst 30-year period on record? |
| Return basis | Forward-looking return projections | Historical U.S. returns since 1926 |
| Portfolio | 30% to 50% in equities | Diversified, adding small-cap stocks and other asset classes |
| Change from before | Up from 3.7% a year earlier | Up from the original 4.0% “Safemax” |
Each figure is conservative in its own way. Morningstar’s 90 percent target accepts that roughly one modeled path in ten falls short. Bengen’s 4.7 percent is a floor built from the unluckiest start dates; averaged across all historical starting years, his sustainable rate was about 7.1 percent. Neither is a prediction. One is a probability statement about modeled futures, and the other is a worst case drawn from the past.
3.9 percent answers “what works nine times in ten, looking forward”; 4.7 percent answers “what survived the worst of history.” Four percent sits between them.
The Range in Dollars
On a $1,000,000 portfolio, the two figures translate to a first-year withdrawal of $39,000 at 3.9 percent and $47,000 at 4.7 percent, each raised for inflation afterward. The gap is $8,000 of first-year income per million. That is the practical cost of choosing a forward-looking, 90 percent standard over a historical worst-case standard.
Why the Order of Returns Matters
Two retirees with the same 30-year average return can end in very different places. Withdrawals taken during early losses sell shares at low prices, and those shares are no longer there for the recovery.
Morningstar research reported by CNBC measured the effect: when a portfolio fell at least 15 percent in the first year of retirement while the retiree withdrew 3.3 percent, the odds of running out within 30 years were six times higher than when the first year was positive. (CNBC, March 2025) The historical cases that produced the original 4 percent figure, including the 1966 and 1973 retirement cohorts, were retirements that began with weak early returns. The debate over the starting rate and the problem of sequence are, in large part, the same question. Our guide to sequence risk covers the mechanics.
A Hypothetical Household, Worked Through
This illustration is hypothetical and simplified. It is not based on any client, assumes 3 percent inflation and a single bad year for clarity, and is not a recommendation.
A couple retires with $1,200,000. Their first-year withdrawal under each standard:
| Starting rate | Year 1 withdrawal | Year 2, raised 3% for inflation |
|---|---|---|
| 3.9% | $46,800 | $48,204 |
| 4.0% | $48,000 | $49,440 |
| 4.7% | $56,400 | $58,092 |
Suppose they choose 4 percent and the first year goes badly. They withdraw $48,000 at the start of the year, leaving $1,152,000, and the portfolio then falls 15 percent to $979,200. Under the rule, year two’s withdrawal is still $49,440, which is now $49,440 ÷ $979,200 = 5.0 percent of the balance. Nothing about the rule changed; the bad year changed the effective rate.
Now suppose the couple had agreed in advance to one simple guardrail: after a year in which the portfolio falls more than 10 percent, skip the inflation raise and trim spending 10 percent. Year two becomes $48,000 × 0.90 = $43,200, or $43,200 ÷ $979,200 = 4.4 percent of the balance. That $6,240 reduction is the kind of adjustment the flexibility research credits with supporting higher starting rates.
A 4 percent start became a 5.0 percent withdrawal after one 15 percent decline. A pre-agreed 10 percent trim brought it back to 4.4 percent without abandoning the plan.
What Moves the Sustainable Rate
The research agrees more about the levers than about the starting decimal:
- Spending flexibility. Guardrail approaches, which trim spending modestly after weak markets and raise it after strong ones, support starting rates roughly 0.5 to 1.5 percentage points higher than rigid inflation-adjusted spending, without a material rise in depletion risk.
- Social Security timing. Morningstar finds that delaying Social Security while spending flexibly can support starting rates near 5.7 percent.
- Horizon. Each figure assumes 30 years. Retiring in the 50s may call for a 35- to 40-year plan and a lower rate; a shorter horizon allows a higher one.
- Portfolio mix. Bengen’s move to 4.7 percent came from adding asset classes, including small-cap stocks. Allocations held mostly in cash fall short of the assumptions behind all of these figures.
How We Approach This in a Plan
We use the published range as a starting reference, then build the rest of the income plan around it, because the rate interacts with nearly every other retirement decision.
- Structure around the rate. A cash reserve, a bond ladder and pre-agreed guardrails, laid out in retirement income and withdrawal rates, keep a bad first year from forcing sales.
- Social Security. A later claim raises lifetime income and supports a higher portfolio rate, but the portfolio carries more in the years before benefits begin. The arithmetic of an early claim is in claiming Social Security at 62.
- Taxes. A 4 percent withdrawal from a pre-tax IRA is not 4 percent of spending money. Which account funds each year is covered in withdrawal sequencing, and larger withdrawals can raise Medicare premiums two years later, as described in the IRMAA cliff.
- Required distributions. RMDs can push pre-tax withdrawals above a chosen rate later in retirement. The Uniform Lifetime Table factor is 26.5 at 73 and 20.2 at 80, so the required share of an IRA rises from about 3.8 percent to about 5.0 percent. (IRS Publication 590-B, Appendix B) Our RMD guide explains how that interacts with the plan.
- The target itself. A starting rate implies a portfolio size; turning one into the other is the subject of how much you need to retire.
Questions Worth Answering Before You Decide
- How long should the plan last, given both spouses’ ages and health?
- How much of annual spending is essential, and how much could flex after a weak year?
- When will Social Security and any pension begin, and how much of spending will they cover?
- How is the portfolio allocated, and does it resemble the portfolios behind the published rates?
- Which accounts will fund withdrawals, and what will taxes take from each dollar?
- What specific rule, agreed in advance, will govern spending after a market decline?
What This Does Not Mean
- It does not mean 4 percent is safe for everyone. The figures assume a 30-year horizon, diversified portfolios and disciplined spending. Households differ.
- It does not mean the research is a promise. A 90 percent success rate leaves about one modeled path in ten that runs short, and historical worst cases describe the past, not the future.
- It does not mean the rate should never change. What recent research has retired is the idea that one number, fixed at the start and never revisited, is a complete income plan.
- It is not personalized advice. A withdrawal rate for a specific household should come from a full plan reviewed with a qualified professional.
Frequently Asked Questions
Q: Is the 4% rule dead in 2026?
No. It falls between Morningstar’s 3.9 percent, a forward-looking rate with a 90 percent chance of lasting 30 years, and Bengen’s 4.7 percent, the historical worst case with a broader mix of asset classes.
Q: Why do Morningstar and Bengen publish different safe withdrawal rates?
They ask different questions. Morningstar projects future returns and targets a success probability; Bengen asks which rate survived the worst 30-year stretch in U.S. history. The methods, not the arithmetic, explain the gap.
Q: Does the 4% rule mean withdrawing 4 percent of the balance every year?
No. It means withdrawing 4 percent of the starting balance in year one, then raising that dollar amount for inflation each year. On $1 million, 3.9 percent is $39,000 and 4.7 percent is $47,000 in the first year.
Q: What happens to the rule after a bad first year?
The dollar withdrawal stays the same, so the effective rate rises. In our hypothetical, a 4 percent start became 5.0 percent of the balance after a 15 percent decline. Morningstar research found that a first-year loss of 15 percent or more raised depletion odds sixfold.
Q: What can support a higher starting withdrawal rate?
Spending flexibility adds roughly 0.5 to 1.5 percentage points in the research, and Morningstar finds that delayed Social Security combined with flexible spending can support rates near 5.7 percent.
Q: Does a longer retirement change the safe withdrawal rate?
Yes. The published figures assume 30 years. A retirement starting in the 50s may need to last 35 to 40 years, which points to a lower starting rate.
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The views and opinions expressed here are those of The Financial Sciences Company as of the publish date and are provided for informational and educational purposes only. They are not personalized investment, tax, or legal advice. The Financial Sciences Company, LLC is a registered investment adviser. Registration does not imply a certain level of skill or training. Additional information is available in our Form ADV at adviserinfo.sec.gov.
General educational information, current as of 2026. Figures and rules change. For guidance specific to your situation, speak with a qualified professional.