4% rule

Withdraw 4% annually to last 30 years

The 4% rule, also known as the rule of 25, was created by simulating 30-year retirement periods using historical US market performance starting in 1926. William Bengen, who published the rule in 1994, chose 4% as the highest rate that never failed in the dataset. The rule has been widely discussed in retirement planning literature and popular media since its publication.

The 4% rule assumes that a retiree's portfolio is in a tax-free account composed of US stocks and bonds. Bengen's analysis aimed to determine a safe withdrawal rate that would sustain a retiree's savings for 30 years. The rule has been further supported and popularized by the Trinity study in 1998.

Example

A retiree with $1 million in retirement savings can withdraw $40,000 annually (4% of $1 million) for 30 years, adjusting for inflation.

Remember this

Understanding the 4% rule helps retirees plan their savings and withdrawals to ensure their retirement funds last for 30 years.

Text adapted from Wikipedia, licensed under CC BY-SA 4.0.

Related concepts

Rule of 72

Rule of 72 estimates doubling time by dividing 72 by interest rate

List of Call the Midwife episodes

Older financial institutions likely to survive longer

Risk-free rate

Risk-free rate inferred from zero-coupon Treasury bonds (T-bills)

VIX

VIX measures 30-day S&P 500 volatility

Aversion

Losing $100 hurts roughly 2x more than gaining $100 feels good

the 50/30/20 budget rule suggests

Federal budget presented by Treasurer Jim Chalmers on 12 May 2026

Educational content, not financial advice.

Swipe through 100 ML concepts daily

Open Pocket Polymath