The 4% Rule in 2026: What the Latest Research Says

The 4% rule is the most referenced guideline in retirement planning. But the research behind it has evolved significantly since Bill Bengen first published his findings in 1994. Here is what the latest research says about safe withdrawal rates.

The Original 4% Rule

Bill Bengen analyzed historical market data going back to 1926 and found that retirees who withdrew 4% of their portfolio in year one, then adjusted for inflation each year after, never ran out of money over any 30-year period. The worst historical periods (like retiring in 1966 before stagflation) still worked.

This became known as SAFEMAX, the maximum safe withdrawal rate historically.

Bengen's 2025 Update: 4.7%

In his 2025 book A Richer Retirement, Bengen updated his analysis with additional historical data and refined methodology. His new finding: 4.7% is the updated safe withdrawal rate, which he calls the Universal Safemax.

This higher number reflects that even the worst historical periods supported more than 4% when analyzed with improved methods. However, Bengen notes this assumes a traditional 30-year retirement window and a balanced stock/bond portfolio.

Morningstar's 2025 Analysis: 3.9%

Morningstar's State of Retirement Income 2025 report takes a different approach. Instead of looking backward at history, they use forward-looking projections based on current bond yields, equity valuations, and inflation expectations.

Their conclusion: new retirees in 2026 should use a 3.9% withdrawal rate. This more conservative figure reflects lower expected returns compared to historical averages.

Why the Numbers Differ

The gap between 4.7% (Bengen) and 3.9% (Morningstar) comes down to methodology:

Historical analysis (Bengen) asks what always worked in the past. This is inherently backward-looking but covers actual market conditions including wars, depressions, and stagflation.

Forward-looking analysis (Morningstar) asks what current market conditions suggest. Bond yields are lower than historical averages. Stock valuations are higher. These factors may reduce future returns.

Neither approach is wrong. They answer different questions.

The Flexibility Factor

Both researchers agree on one thing, flexibility dramatically increases safe withdrawal rates.

Morningstar found that retirees willing to reduce spending by 10% in bad market years can safely start at 5.7%. Those with even more flexibility, willing to cut up to 25% during downturns, can use withdrawal rates approaching 6%.

Charles Schwab's analysis supports this, suggesting 5.4% to 6% is sustainable for retirees with 20-year horizons who maintain spending flexibility.

And many of our community members at SavePoint tend to err on the conservative side of things, being mindful of downturns and the worst case scenario, ultimately opting for around 3-4% (as many have grown up in 0% interest rate scenarios).

What This Means for Your Planning

Rather than fixating on a single percentage, consider these principles:

• Use 3.5% to 4% for conservative planning with no flexibility
• Use 4% to 4.5% as a reasonable baseline with some flexibility
• Build in flexibility to increase withdrawals during good years and reduce during bad years
• Run Monte Carlo simulations to see probability ranges, not just single numbers
• Revisit your plan annually and adjust based on actual portfolio performance