{"id":158941,"date":"2025-08-19T17:37:12","date_gmt":"2025-08-19T17:37:12","guid":{"rendered":"https:\/\/www.europesays.com\/us\/158941\/"},"modified":"2025-08-19T17:37:12","modified_gmt":"2025-08-19T17:37:12","slug":"heres-the-original-authors-new-retirement-advice","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/158941\/","title":{"rendered":"Here\u2019s the original author\u2019s new retirement advice"},"content":{"rendered":"\n

For more than 30 years, the so-called\u00a04 percent rule<\/a> \u2014 a tidy formula to help retirees figure out how much they can withdraw from their portfolios each year without running out of money \u2014 has loomed large in retirement planning circles.<\/p>\n

But William Bengen, the now 77-year-old retired fee-only financial planner who introduced the concept in a 1994\u00a0Journal of Financial Planning paper<\/a>, says his work was never meant to be a cookie-cutter golden rule.<\/p>\n<\/p>\n

\u201cI think the most important facet people overlook is that the 4 percent rule \u2014 or the newer version of the 4.7 percent rule \u2014 is the worst-case scenario,\u201d says Bengen. \u201cIt\u2019s really designed for only the most conservative person to use in retirement planning.\u201d<\/p>\n

Bengen\u2019s new book,\u00a0A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, released Aug. 5, builds on his original research along with decades of market data, more asset classes and lessons from real-world retirees.<\/p>\n

The takeaway? The 4 percent figure was always meant to be the floor \u2014 and many people can safely spend much more in retirement.<\/p>\n

Bengen\u2019s 1994 research used historical market data to determine a \u201csafe withdrawal rate<\/a>\u201d \u2014 the amount retirees could take from a portfolio each year, adjusted for inflation, without depleting it over a 30-year period.<\/p>\n

The original math behind the 4 percent rule came out to 4.15 percent, but it was rounded down in a publication, and the round number stuck.<\/p>\n

Bengen\u2019s research assumed a portfolio split evenly between\u00a0U.S. large-cap stocks<\/a> and intermediate-term government bonds, and the withdrawal schedule worked much like Social Security\u2019s\u00a0cost-of-living adjustment<\/a>. You take a set percentage the first year, then give yourself an inflation bump each year after.<\/p>\n

Compare advisors: Bankrate’s list of the best financial advisors\u00a0<\/a><\/p>\n

Bengen later revised the figure to 4.5 percent in 2006. Now, based on broader asset allocation models, he\u2019s identified 4.7 percent as the worst-case starting point \u2014 what he refers to as the \u201cSAFEMAX\u201d in his book.<\/p>\n

That rate would have kept a 1968 retiree afloat for 30 years, despite multiple bear markets early in retirement and long periods of high inflation in the 1970s. Out of roughly 400 historical retirement scenarios he\u2019s modeled, only one had to withdraw that little to make it 30 years.<\/p>\n

\u201cThe average [safe withdrawal rate] over the last 100 years, believe it or not, is 7 percent,\u201d says Bengen.<\/p>\n

Bengen says the original number was never meant to be the default for everyone. Today, he says most retirees can comfortably take 5.25 to 5.5 percent out without worrying about running out of money.<\/p>\n

\u201cIf you take less, the odds are very high that you\u2019re going to end up with a big pile of money when you retire and a lot of regrets for not having spent more during retirement,\u201d he says.<\/p>\n

In his own life, Bengen started retirement in 2013 and used a 4.5 percent withdrawal rate. But over time, he has bumped up that rate and withdrawn more as markets performed well.<\/p>\n

Bengen recommends taking evenly spaced withdrawals throughout the year, which smooths income and avoids market-timing risks.<\/p>\n

But for retirees with other income sources, deferring portfolio withdrawals until the end of the year \u2014 especially from tax-deferred accounts \u2014 can keep money compounding tax-free and potentially stretch the life of a portfolio.<\/p>\n

In his latest book, Bengen doesn\u2019t simply tweak the original number \u2014 he reframes how retirees should think about the whole process. The 4 percent rule was never intended to be a \u201cset it and forget it\u201d magic formula. Instead, he wants people to understand that a safe withdrawal rate depends on timing, market conditions, inflation and personal decisions.<\/p>\n

What follows are the core lessons from his decades of research and experience \u2014 starting with the biggest threats to a retirement portfolio, the portfolio mix he thinks works best today, and why budgeting and flexibility are just as important as any withdrawal percentage.<\/p>\n

Bear markets may cause anxiety, but history shows they tend to recover in a year or two. Inflation, on the other hand, quietly chips away at the value of every dollar you withdraw, forcing you to spend more in order to maintain the same standard of living. If inflation stays high for years, the damage can be permanent.<\/p>\n

Bengen calls inflation \u201cprobably the most important factor of all\u201d when determining your retirement withdrawal strategy because it attacks purchasing power relentlessly. A brief spike can often be absorbed, but persistent inflation \u2014 like in the 1970s \u2014 demands quick action.<\/p>\n

\u201cYou need to make adjustments immediately to your spending to get you through the storm and hope it doesn\u2019t last too long,\u201d says Bengen.<\/p>\n

Worried about inflation?: 5 ways to keep inflation from wrecking your retirement portfolio<\/a><\/p>\n

Bengen\u2019s original work relied on a sample portfolio with a mix of U.S. large-cap stocks and intermediate-term government bonds. That\u2019s it.<\/p>\n

In his new model portfolio, he expanded to include U.S. large-cap stocks, U.S. mid-cap stocks, U.S.\u00a0small-cap stocks<\/a>, U.S. micro-cap stocks, international stocks, intermediate-term U.S. government bonds and\u00a0U.S. Treasury bills<\/a>.<\/p>\n

\u201cEach of the asset classes has its own cycle,\u201d says Bengen. \u201cIf they all do it at different times, it\u2019s going to provide a boost to your portfolio because when one investment is not doing so well, another one might be picking up for it.\u201d<\/p>\n

He recommends\u00a0annual rebalancing<\/a> and even sees a small role for alternative assets like Bitcoin \u2014 just 1 percent in his own portfolio \u2014 as a diversifier. He also sees value in using\u00a0simple annuities<\/a> to steady retirement income.<\/p>\n

\u201cAnnuities can help the withdrawal,\u201d he says. \u201cI think they add an element of stability and move some of the risk of the stock market, which is a concern for folks.\u201d<\/p>\n

Bengen also challenges the traditional advice to scale back on stocks before retirement. His preference is to stay 100 percent invested in equities until five years before retirement, then gradually shift to your target allocation.<\/p>\n

Doing so helps maximize your portfolio\u2019s growth potential and the benefits of compounding during the final high-earning years leading up to retirement. Delaying the shift to safer assets also shortens the lower-return period while still giving you time to reduce risk before withdrawals begin.<\/p>\n

Some academics have criticized the 4 percent rule for not factoring in large, irregular costs like major home repairs, medical bills or long-term care.<\/p>\n

Researchers and policy groups show\u00a0out-of-pocket health costs<\/a> can be heavy near the end of life, and needing long-term care is both likely and difficult to insure against for most households.<\/p>\n

Bengen agrees these costs are real \u2014 but says his withdrawal strategy was never designed to dictate\u00a0how retirees spend.<\/p>\n

\u201cI\u2019m looking primarily at the withdrawal side \u2014 taking money out \u2014 and not what happens to the money afterward,\u201d he says.<\/p>\n

Retirees should build a separate, detailed budget<\/a> that includes planned big-ticket expenses to avoid unpleasant surprises.<\/p>\n

One way to plan for late-life out-of-pocket spending on health care is to pre-fund a medical reserve. Price premiums, deductibles and typical out-of-pocket costs under your Medicare plan, then create a dedicated reserve in T-bills or a short ladder of\u00a0TIPS<\/a> that mature in the years you expect higher costs.<\/p>\n

Gradually contributing to a\u00a0high-yield savings account<\/a> specifically earmarked for health care costs is another option, sweeping a portion of the money you withdraw each year into this special account.<\/p>\n

Learn more: Planning to retire in 10 years? Do these 6 things first<\/a><\/p>\n

Bengen believes a set-it-and-forget-it approach is dangerous. Instead, retirees should revisit their withdrawal strategy every couple of years to see if they\u2019re ahead or behind their projected target.<\/p>\n

If the portfolio is growing faster than expected, they can spend more. If it\u2019s lagging, they may need to cut back temporarily.<\/p>\n

However, he warns against slashing withdrawals\u00a0too much in a typical bear market, since recoveries usually restore the portfolio\u2019s trajectory pretty quickly. But in times of sustained inflation, quick cuts to spending are essential.<\/p>\n

In his book, Bengen suggests viewing withdrawal rate research as a record of what worked historically, not a prophecy for the future. Echoing Warren Buffett, Bengen says it\u2019s better to be \u201capproximately correct than precisely wrong\u201d when it comes to retirement planning.<\/p>\n

Bengen likens his updated method to following a cookbook: You start with your specific \u201cingredients\u201d \u2014 such as whether your accounts are taxable or tax-deferred, whether you want to leave money to heirs and\u00a0when you plan to claim Social Security<\/a>.<\/p>\n

Here are the eight ingredients Bengen outlines in his book:<\/p>\n

    \n
  1. \n

    Withdrawal scheme<\/p>\n<\/li>\n

  2. \n

    Planning horizon (years you plan to spend in retirement)<\/p>\n<\/li>\n

  3. \n

    Taxable versus non-taxable portfolio<\/p>\n<\/li>\n

  4. \n

    Leaving a legacy to heirs<\/p>\n<\/li>\n

  5. \n

    Asset allocation<\/p>\n<\/li>\n

  6. \n

    Portfolio rebalancing frequency<\/p>\n<\/li>\n

  7. \n

    Striving for above-market returns<\/p>\n<\/li>\n

  8. \n

    Withdrawal timing<\/p>\n<\/li>\n<\/ol>\n

    He stresses that two ingredients are beyond your control \u2014 the valuation of the stock market when you retire and the prevailing inflation rate \u2014 but the rest, from your asset allocation to how frequently you rebalance your portfolio, are completely in your hands.<\/p>\n

    \u201cThey shouldn\u2019t be focused on a single number going in,\u201d he says. \u201cIt\u2019s a process, and people probably shouldn\u2019t skip over any of the steps.\u201d<\/p>\n

    In fact, he says the safe withdrawal rate is \u201cactually the last thing you come up with\u201d after analyzing all of these variables.<\/p>\n

    His point: The 4 percent rule was never meant to be the star of the show. The number is just the garnish on top.<\/p>\n

    As Bengen puts it: \u201cI list all the ingredients of your plan, how they should be mixed together, how long to cook them, and then when you take it out of the oven, how to enjoy it.\u201d<\/p>\n

    For retirees willing to think beyond a single percentage, that recipe can lead to a retirement that\u2019s both financially sustainable and emotionally satisfying.<\/p>\n

    Get started: Match with an advisor to help you achieve your financial goals<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"For more than 30 years, the so-called\u00a04 percent rule \u2014 a tidy formula to help retirees figure out…\n","protected":false},"author":3,"featured_media":158942,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[64,266,255,59846,39145,708,67,132,68,50943,37418,92254],"class_list":{"0":"post-158941","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-inflation","10":"tag-personal-finance","11":"tag-portfolios","12":"tag-retirees","13":"tag-retirement-planning","14":"tag-united-states","15":"tag-unitedstates","16":"tag-us","17":"tag-william-bengen","18":"tag-withdrawal","19":"tag-withdrawal-rate"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115056649327715827","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/158941","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=158941"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/158941\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/158942"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=158941"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=158941"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=158941"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}