If you're in retirement or planning for it, you may want to reconsider your withdrawal rate. Bill Bengen, the financial adviser who got generations of retirement savers hooked on the 4% rule, has increased his recommendation for how much retirees can safely spend. Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake.
Here's what it is and 3 simple steps to fix it ASAP The tax breaks in Trump's 'big beautiful bill' expire after 2028. Here are 4 moves to make before the window closes In an interview with Business Insider, Bengen said his influential 4% rule of thumb should now be closer to 4.7% for retirees who want to prepare for the worst. But under what he considers more realistic conditions today, he actually recommends a starting withdrawal rate of 5.5%.
It may sound like a small adjustment, but it could have major ramifications for how savers plan for retirement, and how much they allow themselves to spend once they get there. Under the 4% rule developed by Bengen in 1994, retirees were advised to withdraw 4% of their portfolio in the first year of retirement. In subsequent years, they would adjust that initial dollar amount for inflation.
Historically, the approach was designed to make a portfolio last roughly 30 years, including through some very bad stock market conditions. Bengen's update reflects decades of additional research, as well as his assessment of the current market. In May, he reiterated to Morningstar his original recommendation was based on a portfolio of U.S. large-cap stocks and intermediate-term U.S.
When he later tested portfolios containing additional asset classes, including small- and micro-cap stocks, their historical performance and diversification benefits allowed the portfolios to withstand larger withdrawals, eventually lifting his most conservative rate from 4% to 4.7%. The 5.5% recommendation is based on a different calculation. Rather than planning for the worst-case scenario, Bengen considers factors such as stock market valuations and expected inflation to determine a more realistic withdrawal rate under current conditions.
And it makes a real difference. Say you had a $1 million 401(k). You would start at roughly $40,000 per year under the 4% rule, versus $47,000 at 4.7% or $55,000 at 5.5%.
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