Building a retirement portfolio and spending one down are different problems. The second has an uncomfortable feature the first doesn't: get it wrong in the wrong direction and you run out of money in your eighties with no way to earn more. The safe withdrawal rate is the research attempting to answer how much you can pull from a portfolio each year without that happening.

For thirty years the standard answer was 4%. As of 2026, the three most-cited sources give three different numbers — and the disagreement is more useful than any single figure.

Where the 4% Rule Came From

Financial planner William Bengen published "Determining Withdrawal Rates Using Historical Data" in the October 1994 Journal of Financial Planning. He backtested every rolling 30-year retirement window starting from 1926 and asked a specific question: what's the highest starting withdrawal rate that would have survived even the worst period in that history?

His answer was about 4.15%, later rounded down to 4% — and the rounded figure is what stuck.

The mechanics matter and are widely misunderstood:

Year 1: withdraw 4% of your starting portfolio. On $1,000,000, that's $40,000.

Every year after: increase that dollar amount by inflation — you do not recalculate 4% of the current balance. At 2.8% inflation, year two is $41,120, year three is $42,271, and so on regardless of what the portfolio did.

That fixed, inflation-adjusted spending path is the entire premise. The later Trinity Study backtest found this approach produced a 95%+ 30-year success rate on a 50/50 US stock/bond mix over 1926–1995.

The 2026 Problem: Three Credible Numbers, Three Different Questions

That's not a rounding error. On a $2 million portfolio, the spread between 3.9% and 5.7% is $78,000 versus $114,000 per year — a $36,000 annual lifestyle difference from the same portfolio.

The numbers differ because the researchers are running fundamentally different experiments.

Bengen: 4.7%, Looking Backward

Bengen has spent three decades updating his own work. In his August 2025 book A Richer Retirement, he raised his figure to 4.7%, calling it the historical worst-case rate — meaning across roughly 400 stress-tested historical scenarios, only one required going as low as 4.7% to last 30 years.

Two caveats do real work here. First, the revision depends on a substantially more diversified portfolio than most people hold — 55% equities spread across mid-cap, small-cap, micro-cap, and international stocks, not the classic two-fund S&P 500 plus Treasuries mix. Applying 4.7% to a conventional 60/40 portfolio overstates the safety margin. Second, his method still asks what history's worst case would have supported. If you think the future could be harder than the past, that number will feel generous.

Bengen has gone further in interviews, suggesting many retirees today could reasonably draw closer to 5.0%–5.5%.

Morningstar: 3.9%, Looking Forward

Morningstar's annual State of Retirement Income study asks a different question entirely. Rather than backtesting history, it builds forward-looking return forecasts for stocks and bonds based on current bond yields, current equity valuations, and projected inflation, then runs simulations targeting a 90% probability of success over 30 years of fixed, inflation-adjusted spending.

For 2026, that answer is 3.9% — up from 3.7% the prior year (improved bond yields) and 3.3% in 2021, but still below the famous 4%.

The Flexibility Finding That Changes Everything

Buried in Morningstar's research is arguably the most practically useful result: retirees willing to adjust spending in response to market conditions could safely start as high as 5.7%.

That's a larger gap than any dispute between the researchers. The cost of rigidity — insisting on the same inflation-adjusted dollar amount regardless of what markets do — is roughly 1.8 percentage points of annual income. Pre-committing to trim spending after bad years (an approach often called a guardrails strategy) buys substantially more income in normal ones.

What This Means for the Accumulation Target

The withdrawal rate you assume determines how much you need to save, and small differences compound into large numbers.

To support $60,000/year in retirement:

The difference between planning at 3.9% versus 4.7% is roughly $262,000 in required savings for the same lifestyle — potentially years of additional working life, or years of unnecessarily delayed retirement, depending on which assumption turns out closer to right.

The 4% version of this is sometimes called the Rule of 300 or the 25x rule: multiply desired annual spending by 25 (or monthly spending by 300) to get the target portfolio.

What the Rule Was Never Designed to Handle

Retirements longer than 30 years. The original research targeted a 30-year horizon. Someone retiring at 45 planning for 40+ years needs a meaningfully lower rate — most research in that territory lands around 3.25%–3.5%.

Non-linear spending. Real retirement spending isn't a flat inflation-adjusted line. It's commonly higher in early active years, lower in the middle, then potentially much higher late if long-term care becomes necessary. The rule assumes a straight line that almost nobody actually follows.

Sequence-of-returns risk in a specific way. The rule accounts for bad markets historically, but the timing matters enormously — poor returns in the first few retirement years do far more damage than identical returns later, because withdrawals are depleting a shrinking base.

Taxes and fees. The headline rate is gross. Taxes owed on withdrawals from traditional retirement accounts, and investment fees, both come out of that number — a 4% withdrawal doesn't mean 4% of spendable income.

Other income sources. Social Security, a pension, or annuity income all reduce how much the portfolio needs to produce, which changes the calculation entirely for most retirees.

How to Think About Your Own Number

Rather than picking a number from the headlines, the research converges on three variables that actually determine it:

Horizon. Roughly 5% for a 20-year retirement, near 4% for 30 years, closer to 3.2%–3.5% for 40+ years.

Portfolio composition. Bengen's higher figure requires his broader diversification. A conservative bond-heavy portfolio or a concentrated one doesn't inherit that margin.

Flexibility. The single largest lever. Willingness to cut spending 10% after a bad market year moves your sustainable starting rate by more than any other factor available to you.

Frequently Asked Questions

Is the 4% rule still valid in 2026?

It remains a reasonable starting reference point, but treating it as a precise answer was never its purpose. Current credible research spans roughly 3.9% to 5.7% depending on assumptions, which is a wide enough range that the assumptions matter more than the rule.

Do I recalculate 4% of my balance each year?

No — not under the original rule. You take 4% in year one, then adjust that dollar amount by inflation annually, never recalculating against the current balance. Recalculating each year is a different strategy with different risk characteristics.

What happens if markets crash right after I retire?

This is sequence-of-returns risk, and it's the primary threat the safe withdrawal rate research exists to address. Early losses combined with ongoing withdrawals damage a portfolio far more than identical losses later, which is exactly why flexible spending strategies outperform rigid ones.

Does the rate account for taxes?

No. The withdrawal rate is gross. Taxes on distributions from traditional pre-tax accounts reduce what you actually get to spend, which is worth building into your own planning rather than assuming the headline number is spendable income.

Should I use a different rate for early retirement?

Yes. A 30-year horizon assumption doesn't transfer to a 40- or 50-year retirement — most research supports meaningfully lower rates, commonly in the 3.25%–3.5% range, for those longer horizons.

Key Takeaways

The 4% rule was a 1994 backtest answering a narrow question: what starting withdrawal rate would have survived the worst 30-year period in market history? It was never an iron law, and its own creator has since revised his figure to 4.7% based on broader diversification, while Morningstar's forward-looking 2026 research arrives at 3.9% for the same rigid spending approach.

The most actionable finding across all of it isn't a number at all — it's that flexibility is worth roughly 1.8 percentage points of annual income. A retiree willing to adjust spending after bad years can responsibly start near 5.7% where a rigid one is limited to 3.9%, which makes willingness to adapt the single most valuable lever in retirement spending.

Sources

• Bengen, William P. "Determining Withdrawal Rates Using Historical Data." Journal of Financial Planning, October 1994.

• Bengen, William P. A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More. Wiley, 2025.

• Morningstar — Morningstar's Retirement-Income Research: Finding Your Safe Withdrawal Rate

This article is for general educational purposes only and does not constitute financial, investment, tax, or legal advice.