# The 4% Rule in Plain English > Where the 4% rule comes from, what the original research actually tested, and why early retirees often plan for a lower withdrawal rate or a flexible one. - URL: https://moneymaster.fyi/the-4-percent-rule-in-plain-english/ - Publication: Money Master (Accel Media) - Topic: FI maths - Published: 2026-11-09; updated: 2026-11-09 - Official sources last checked: 2026-11-09 - Published by: Greg M., Editor in Chief --- The 4% rule is often summed up as "you can safely spend 4% of your savings each year". The research behind it says something narrower: under particular assumptions, a starting withdrawal of about 4% would have lasted through the worst stretches of past US market history, from 1926 into the early 1990s in the original study, over a 30-year retirement. Those assumptions matter most for early retirees. This guide is general education, not individual financial, investment or tax advice. The 4% figure is a rule of thumb drawn from historical studies. It isn't a guarantee that money will last, and it isn't a recommendation to withdraw any particular amount. Past performance does not guarantee future results. ## Where the rule comes from The figure traces back to an article by William P. Bengen, a financial planner, titled "Determining Withdrawal Rates Using Historical Data". It appeared in the October 1994 issue of the Journal of Financial Planning, and the Financial Planning Association reprinted it in 2004 ([FPA reprint](https://www.financialplanningassociation.org/sites/default/files/2021-04/MAR04%20Determining%20Withdrawal%20Rates%20Using%20Historical%20Data.pdf), checked November 9, 2026). Bengen argued that average returns are a poor guide, because a bad run of markets and inflation early in retirement can do lasting damage. So he used actual year-by-year US returns and inflation from an Ibbotson Associates yearbook, imagined a retiree starting on January 1 of each year from 1926 onward, and measured how many years the money would have lasted. His main illustration used a portfolio of 50% common stocks and 50% intermediate-term Treasury notes, continually rebalanced. The retiree withdrew a percentage of the starting balance in the first year, then raised that dollar amount with inflation every year after. His finding for a first-year withdrawal of 4%: in no past case in his data was the portfolio exhausted before 33 years, and in most cases it lasted 50 years or longer. A 4.25% start could have run out in as little as 28 years. At 3%, and up to about 3.5%, no starting year lasted less than 50 years. All of this describes US history from 1926 into the early 1990s. Past performance does not guarantee future results. ## The Trinity study In February 1998, the AAII Journal published "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable", credited on the AAII page to Carl M. Hubbard. It is now usually called the Trinity study ([AAII Journal](https://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable), checked November 9, 2026). It asked the question differently. Rather than looking for one safe rate, it reported a "portfolio success rate": the percentage of past payout periods in which a portfolio would have supported the withdrawals without running out. It used US market data from 1926 to 1995, with the S&P 500 standing in for stocks and long-term, high-grade corporate bonds for bonds. It tested five mixes, from all stocks to all bonds, payout periods of 15, 20, 25 and 30 years, and starting withdrawal rates from 3% to 12%, both as fixed dollar amounts and adjusted for inflation. Two of its conclusions bear directly on early retirement. Withdrawals that rise with inflation need a substantially lower starting rate than fixed ones. And, in the article's words, "Early retirees who anticipate long payout periods should plan on lower withdrawal rates." Its success-rate tables are in the article itself. These results describe US data from 1926 to 1995. Past performance does not guarantee future results. ## What the studies assumed These limits are easy to lose when the result is shortened to "4%". **US data only.** Both used US stock, bond and inflation history from a particular era. Neither tells us how other markets, or the future, would have treated the same withdrawals. **Specific portfolio mixes.** Bengen's headline figure came from a 50/50 mix of stocks and intermediate-term Treasuries; he also tested other mixes and argued for a starting range of 50% to 75% in stocks. The Trinity study used the S&P 500 and long-term corporate bonds. A portfolio built differently can behave differently. Invest Insights explains how a mix of assets is put together in [diversification and asset classes](https://investinsights.net/diversification-and-asset-classes/) and [asset allocation by time horizon](https://investinsights.net/asset-allocation-by-time-horizon/). **No fees or taxes.** The Trinity study says plainly that it "did not adjust for taxes or transaction costs". Bengen assumed the money sat in tax-deferred accounts, and his paper doesn't model fund fees. Real withdrawals pay both. **Set horizons.** Bengen built his rule around a minimum of 30 years. The Trinity study's longest payout period was 30 years. **Rigid spending.** The withdrawal rises with inflation every year, whatever markets do, with no cuts in bad years and no raises in good ones. ## An invented example of how the rule works These figures are invented and assumed, not a forecast. Someone starts with a $1,000,000 portfolio. A 4% first-year withdrawal is $1,000,000 × 0.04 = $40,000. Suppose inflation runs at an assumed 3% a year. Under the rule, the second year's withdrawal is $40,000 × 1.03 = $41,200, and the third is $41,200 × 1.03 = $42,436. The withdrawal follows prices, not the portfolio. Now suppose markets fall and the portfolio is worth $800,000 when the second withdrawal is due. The $41,200 is now $41,200 ÷ $800,000 = 5.15% of what's left. That's the risk the research tested: an early fall means withdrawing a larger share of a smaller pot. Fees take a share too. An assumed fund fee of 0.5% a year on $1,000,000 is $5,000, or 12.5% of a $40,000 withdrawal. Invest Insights shows how fees add up in [expense ratios: what a fund's fee costs you](https://investinsights.net/expense-ratios-what-a-funds-fee-costs-you/). ## Why early retirement changes things Someone stopping at 45 may need money to last 40 or 50 years, longer than the 30-year periods at the center of both studies. Bengen himself described retiring at 60 or younger as early. A longer horizon means more chances of meeting a long stretch of poor returns or high inflation, and less room to recover from one in the first years. People planning a long retirement often respond by planning around a lower starting withdrawal, keeping some earned income in the first years, or building flexibility into spending. Each has a cost: a lower rate means a larger target, which [your FI number](https://moneymaster.fyi/your-fi-number-from-annual-spending-to-a-target/) works through, and flexibility means a less predictable budget. ## Flexible withdrawals The original rule assumes spending never changes except for inflation. Bengen's paper touches on the alternative: for a retiree hit by an early market fall, a modest, lasting cut in withdrawals would have left noticeably more wealth decades later. Flexible approaches trade a steady budget for less exposure to bad timing, and how much they help depends on rules the original studies didn't test. ![A rain barrel tap open and filling a galvanized metal watering can beside garden beds.](https://moneymaster.fyi/media/the-4-percent-rule-in-plain-english--inline-1-1600w.webp) ## Where the rule fits in a plan The rule gives a quick way to turn spending into a target: 25 times yearly spending matches a 4% starting withdrawal, because 1 ÷ 0.04 = 25. Many people use that as a first estimate, then adjust it for a longer horizon, fees, taxes and how flexible their spending could be. How fast anyone gets there depends mostly on [savings rate](https://moneymaster.fyi/savings-rate-the-number-that-decides-when-you-can-retire/). Taxes on withdrawals depend on which accounts the money comes from. How this applies depends on your situation; a tax professional can confirm it. We are not CPAs, and this guide has not been reviewed by a CPA. ## Common questions **What is the 4% rule?** A rule of thumb from historical research: a retiree withdraws 4% of the portfolio in the first year, then raises that dollar amount with inflation. In Bengen's 1994 study of US data from 1926 onward, no starting year he tested ran out of money in less than 33 years. Past performance does not guarantee future results. **Does the 4% rule work for a 40-year retirement?** The original studies centered on 30-year periods, so they don't answer that directly. The Trinity study article says early retirees with long payout periods should plan on lower withdrawal rates. **Does the 4% rule include inflation?** In Bengen's version, yes: the first year's dollar amount rises with inflation each year. The Trinity study tested both fixed and inflation-adjusted withdrawals. **What is a safe withdrawal rate for early retirement?** No rate is guaranteed. Lower starting rates, fees kept in view and flexible spending all reduce the risk of running out, but none removes it. Sources checked November 9, 2026: [Bengen, "Determining Withdrawal Rates Using Historical Data", Journal of Financial Planning, October 1994 (FPA reprint)](https://www.financialplanningassociation.org/sites/default/files/2021-04/MAR04%20Determining%20Withdrawal%20Rates%20Using%20Historical%20Data.pdf) and [Carl M. Hubbard, "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable", AAII Journal, February 1998](https://www.aaii.com/journal/article/retirement-savings-choosing-a-withdrawal-rate-that-is-sustainable). --- Source: https://moneymaster.fyi/the-4-percent-rule-in-plain-english/. Please link to the page when quoting it. Rules and prices change; check the date above.