Retirement planning has evolved over the years, and one of the fundamental rules guiding it – the 4% rule – isn’t set in stone anymore. In this blog, we’ll explore why the safe withdrawal rate is no longer 4%, along with some key insights about this rule that you may not be aware of. We’ll also discuss the importance of personalized retirement planning and why relying solely on the 4% rule may not be the wisest approach.


The 4% Rule: A Starting Point

The 4% rule was once a common starting point for retirement planning, but it’s no longer the definitive guide. William Bengen, the rule’s creator, initially proposed it in 1994, suggesting that retirees could withdraw 4% of their portfolio each year. This blog delves into the reasons why this rule is no longer fixed and explores its limitations. I also recommend you check out this video to help pick where the 4% rule leaves off.


Limitation 1: Neglecting Investment Fees and Taxes

One of the critical shortcomings of the 4% rule is that it doesn’t account for investment fees or taxes. It assumes that any fees or taxes incurred will be covered by the withdrawn amount, potentially impacting the net spending amount during retirement. High investment fees can significantly reduce your available funds, making it essential to consider these costs in your planning.


Limitation 2: Allocation to Stocks Matters

The 4% rule’s success is closely tied to your portfolio’s allocation to stocks. While the original rule suggested a range between 50% to 75% allocation to stocks, Bengen later pinpointed the optimal allocation at 63% in 1996. Your asset allocation choices directly influence how much you can safely withdraw in retirement, so it’s crucial to consider this factor when planning.


Expanding Beyond the Two-Fund Solution

In the rule’s early days, it relied on a two-fund solution, typically involving the S&P 500 and intermediate US Treasury bonds. However, Bengen later expanded the rule to include a broader range of asset classes like international stocks, cash, and small-cap stocks. This evolution underscores the need for flexibility and adaptability in your retirement strategy.


The 4% Rule Becomes the 4.7% Rule

The 4% rule has been updated to the 4.7% rule by William Bengen. This revision is a response to the inclusion of additional asset classes like US micro-cap and small-cap stocks, which significantly increased the withdrawal rate. It’s important to keep this updated figure in mind when planning for your retirement.


Time Matters: The 30-Year Limitation

The 4% rule is designed for a 30-year retirement period. If your retirement extends beyond this timeframe, you may need to adjust your withdrawal rate accordingly. Studies have shown that for a 20-year retirement, a withdrawal rate as high as 5.4% can still be successful, highlighting the importance of personalized planning.


The Reality of Changing Expenses

The 4% rule assumes constant spending throughout retirement. In reality, retirees often spend more in the early years and less in later years, even as medical expenses may increase. Your expenses and withdrawal planning should be dynamic, reflecting the changing nature of your financial needs.


Sequence of Returns Risk

The 4% rule’s outcomes vary widely depending on the year you retire. This is due to the sequence of returns risk, which can be mitigated with proactive planning and ongoing strategies. Understanding this risk underscores the need for a customized approach rather than relying solely on a rule of thumb.


Seek Professional Guidance

The 4% rule, while a useful starting point, should not be the sole basis for your retirement plan. To optimize your retirement withdrawal strategy and tax reduction strategy, consider consulting a Certified Financial Planner (CFP) who specializes in retirement planning. Personalized guidance can help you achieve your retirement goals more effectively.



The 4% rule has evolved and is no longer a one-size-fits-all solution for retirement planning. Personalization, careful consideration of fees and taxes, and a dynamic approach to expenses are essential. Seek out expert advice to create a retirement plan tailored to your unique circumstances. Reach out to us at Streamline Financial for assistance in crafting the ideal strategy for your retirement. Your retirement should be as unique as you are.


Disclaimer: Since we don’t know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Streamline Financial Services, LLC or its members cannot be held liable for any use or misuse of this content.

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Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.