What is the 4% rule, and how should I read a withdrawal rate?

The 4% rule is a finding from US market history: if you withdraw 4% of your savings in the first year and then raise that amount with inflation every year, a balanced portfolio lasted at least 30 years in every period William Bengen tested, and in 95% of the 30-year periods the Trinity study tested. It is a starting point for estimating how much you need, not a law and not a promise. Your withdrawal rate in any one year is simply what you take out that year divided by what you hold at the start of it.

What the research actually found

• Bengen (1994) used US returns from 1926 for a portfolio of 50% shares and 50% intermediate-term Treasuries. A 4% first-year withdrawal, raised with inflation, never ran out in less than 33 years. At 4.25% the worst case was about 28 years, and at 5% people starting in the late 1960s and early 1970s had only about 20 years. He recommended holding between 50% and 75% in shares.
• The Trinity study (1998) tested 1926–1995 using the S&P 500 and long-term high-grade corporate bonds. With inflation-adjusted withdrawals over 30 years, 4% succeeded in 95% of periods for a 50/50 mix and 98% for 75/25; at 5% the figures fell to 76% and 83%, and at 6% to 51% and 68%.
• Morningstar (December 2025), using forward-looking assumptions rather than history, put the safe starting rate at 3.9% for 30 years with a 90% chance of money remaining, from portfolios holding 30–50% in shares. It has moved between 3.3% and 4.0% across its last five annual estimates.

What the rule is not

• It is not 4% of whatever you hold each year. The 4% sets the first year’s amount; after that the amount follows prices, not the balance.
• It is not built for long horizons. Both classic studies looked at about 30 years. Morningstar’s rate falls to 3.5% for 35 years and 3.3% for 40; Vanguard says people with 50-year horizons should adapt it.
• It ignores fees and tax, and assumes spending never flexes.
• It is one country’s history. Both classic studies used US market data only, and other markets have had different histories.

How to read a withdrawal rate as you go

Once you are drawing on savings, this year’s rate is a running health check. A rate that stays near where it started is fine; one that keeps climbing means withdrawals are outpacing what the savings earn. Bengen warned against raising withdrawals just because the first years went well, since early gains may be needed to offset weaker years later.

Flexibility can improve the odds a great deal. Morningstar found that some flexible spending methods lifted the safe starting rate to 5.7%. Vanguard gives an example of a ceiling and floor: after a year in which the portfolio rose 10% you might raise spending by up to 5%; after a 10% fall, cut it by up to 2.5%.

In Nivritee

Your plan works out a withdrawal rate for every year once you have stopped earning: what you spend beyond your continuing income, divided by the savings you start that year with. The Overview shows the Average withdrawal rate with your first year beside it — and the first year is the one to act on, because money taken out early has the least time to recover. A rate up to 4% is shown as a pace most plans can sustain, between 4% and 6% as a caution, and above 6% as a concern; those are boundaries for colouring the figure, not a rule. What is the withdrawal rate in my plan? covers the tile itself.