You may be relying too much on the 4% rule — here’s how to update your calculations for true long-term retirement health

Financial advisor William Bengen published the original framework in the Journal of Financial Planning in October 1994. On a $1 million portfolio, a 4% first-year withdrawal works out to $40,000, and that amount rises with inflation each year after.

Bengen built the model using U.S. market data from 1926 and a mix of stocks and bonds designed to survive any 30-year stretch in that record. It held up for the most part, but two of its core assumptions are under real strain.

Why the original rule is showing cracks

Start with bond yields. When Bengen ran his numbers, 10-year Treasury bonds paid close to 8%. Today, they’re around 4.5%. That matters because bonds used to provide a steady cushion in the portfolio. Now that income is much lower, investors have two choices: take on more stocks and more ups and downs, or spend less each year.

Then there’s inflation. Consumer prices rose 4.2% over the 12 months ending in May 2026, according to the Bureau of Labor Statistics. The 4% rule assumes inflation stays relatively steady and manageable. When inflation runs hotter for longer, those annual increases pile up faster than the original model was built to handle.

“Let’s say we have two years of 7% inflation,” Dan Keady, a certified financial planner and senior director of financial planning at TIAA, told Kiplinger. Someone who started pulling $100,000 a year would be withdrawing $114,490 by year three, and because each increase becomes the new base for the next one, those higher withdrawals compound over time.

What the experts are telling retirees now

Bengen has raised his own estimate. In his 2025 book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, Bengen says the new SAFEMAX — his worst-case safe withdrawal rate — is 4.7% for a more diversified retirement portfolio over a 30-year horizon. That 4.7% figure is the lowest rate that survived the toughest retirement sequence in his data.

But he also says many retirees today may be able to start a bit higher. “I believe a SAFEMAX of 5.25% to 5.5% seems like a reasonable, conservative estimate for current retirees,” Bengen wrote in his book.

Morningstar’s December 2025 State of Retirement Income report put the 2026 safe withdrawal rate at 3.9% for portfolios with 30% to 50% in stocks, based on forward-looking market forecasts and a 90% chance the money lasts 30 years. But if you’re willing to cut back in bad years and spend more in good ones, Morningstar says that number can go as high as 5.7%.

The sequence-of-returns problem

The 4% rule has one big blind spot: what happens in the first few years of retirement.

That’s called sequence-of-returns risk. If the market falls in the early years of your retirement, you’re pulling money out while your portfolio is down. That means you lock in losses by selling shares when prices are low, and those shares can’t help you when the market recovers.

How soon the bad years come also matters. In a Fidelity model, a retiree who started with $1 million and withdrew $50,000 a year ended up with more than $3 million after 30 years when the good years came first. But when the bad years came first, the same portfolio ran out in 27 years.

That’s why some advisors use the guardrail approach, developed by financial planner Jonathan Guyton and computer scientist William Klinger, instead. Instead of taking the same amount every year, you check your portfolio and inflation once a year and adjust. If the market drops, you cut back. If markets do well, you can spend a little more.

What this means for your money

The 4% rule isn’t wrong, but it doesn’t cover everything by itself. You can make it work better with a few simple adjustments.