Is the 4% Rule Still Safe in 2026?
With interest rates stabilizing and inflation cooling, we re-examine the Bengen study to see if the 4% Safe Withdrawal Rate holds up in the current economic climate.
The History of the 4% Rule
The 4% rule was born from a 1994 study by financial advisor William Bengen. He looked at 50 years of market data and found that there was no 30-year period in history where a retiree would have run out of money if they withdrew 4% of their initial portfolio (adjusted for inflation) every year.
Why 2026 is Different
The market environment of the 2020s has been characterized by higher volatility and a return to positive real interest rates. This is actually good news for retirees. The "Zero Interest Rate Policy" (ZIRP) era forced retirees to take excessive risks in equities to generate yield. Today, you can get decent risk-free returns.
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The Verdict
Most experts now suggest a dynamic withdrawal rate. Start at 4%, but be prepared to cut spending if the market drops significantly in the first 5 years of retirement (Sequence of Returns Risk). If the market booms, you can give yourself a raise.
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