What Is the 4% Rule for Retirement? How Much You Can Safely Withdraw in 2026

The 4% rule is the most quoted shortcut in retirement planning. It answers one question: how much can you withdraw from your savings each year without running out of money?

The appeal is its simplicity. Take 4% of your portfolio in the first year of retirement, then adjust that dollar amount for inflation every year after. A $1,000,000 nest egg becomes a $40,000 starting paycheck. No spreadsheet, no financial advisor, no annuity math.

But the rule is now more than three decades old, and the number at the center of it is being pulled in two directions. The planner who invented it says it should be higher. One of the most respected research teams in the industry says it should be lower. Here is what the 4% rule actually is, how it works in dollars, and what it means for anyone retiring in 2026.

Where the 4% rule came from

The rule was not handed down by the government or a bank. It came from a single piece of research.

In 1994, a California financial planner named William Bengen published a study in the Journal of Financial Planning titled “Determining Withdrawal Rates Using Historical Data.” Bengen wanted to know how much a retiree could safely spend without exhausting their savings, even with the bad luck of retiring just before a market crash.

He tested every 30-year retirement window in modern US history, including people who retired into the Great Depression and the 1970s stagflation. His finding: a retiree with a balanced mix of stocks and bonds could withdraw 4% in year one, raise that amount with inflation each year, and still have money left after 30 years — in every historical case. Bengen called this worst-case figure the SAFEMAX.

A separate 1998 study by three professors at Trinity University reached a similar conclusion, and the press shortened the whole idea to the catchy “4% rule.” It has anchored retirement planning ever since.

How the 4% rule works in practice

The mechanics take about a minute to learn.

• Year one: add up every retirement account — your 401(k), IRAs, and taxable brokerage balances — and withdraw 4% of the total.
• Every year after: ignore what the market did. Take last year’s dollar withdrawal and increase it by the rate of inflation.

A worked example makes it concrete. Say you retire with $1,000,000.

• Your first-year withdrawal is $40,000.
• If inflation runs 3% that year, your second-year withdrawal rises to $41,200 — not 4% of the new balance, but last year’s $40,000 plus inflation.
• The raise continues every year, so your spending power stays flat even as prices climb.

Whether those dollars sit in a taxable account or a tax-free Roth IRA changes your tax bill but not the rule’s arithmetic. This is the rule’s real purpose: it protects your standard of living, not just your account balance. A retiree drawing a fixed $40,000 forever would quietly get poorer each year as inflation eats the dollar. The 4% rule builds the raise in.

What the rule assumes — and where it breaks

The 4% rule is a useful starting point, not a law of nature. It rests on assumptions that may not match your life.

It assumes a 30-year retirement. Retire at 62 and expect to live into your 90s, and 30 years may not be enough of a runway. It also assumes a specific portfolio — roughly half to three-quarters in stocks, the rest in bonds. Hold too little in stocks and the math stops working, because the portfolio cannot outrun inflation.

The biggest blind spot is what planners call sequence-of-returns risk. A retiree who hits a deep bear market in their first few years is far more exposed than one who hits the same crash a decade in, because early losses come out of a portfolio that is also being drained by withdrawals. The 4% rule was built around exactly that danger — but it handles it by being conservative, which means in most retirements it leaves a large amount of money unspent.

And the rule is rigid. It tells you to take the inflation raise even in a year your portfolio fell 20%. Few real retirees would actually do that, which is both a weakness of the rule and a hint at how to improve it.

Is it still 4% in 2026?

This is where the headline number gets interesting, because the experts no longer agree.

Bengen himself now thinks 4% is too low. In his 2025 book A Richer Retirement, he revisited his original work with a more diversified portfolio — seven asset classes instead of two, including small-cap and international stocks — and concluded the true worst-case safe rate is closer to 4.7%. On a $1,000,000 portfolio, that is a $47,000 starting paycheck instead of $40,000 — a meaningful $7,000 a year.

Morningstar, whose analysts publish a closely watched annual study, lands lower. Its State of Retirement Income report for 2026 puts the base-case safe starting rate at 3.9% for a retiree who wants steady, inflation-adjusted income with a 90% chance of not running out over 30 years. That is up from 3.7% the year before, lifted by higher bond yields, but still below the classic 4%.

Why the gap? The two are answering slightly different questions. Bengen measures the worst outcome in actual US history. Morningstar runs forward-looking simulations that assume today’s stock valuations are stretched and future returns more muted. Neither is wrong — together they bracket a reasonable range. The honest takeaway for 2026 is that “around 4%” remains a sound anchor, with roughly 3.9% to 4.7% as the realistic band depending on how conservative you want to be.

How to use the 4% rule without getting burned

Treat the 4% rule as a compass, not a contract.

Use it first as a savings target. Flip the math: if you want $60,000 a year from your portfolio, you need roughly $1,500,000 saved, or $60,000 divided by 0.04. That single calculation tells you whether you are on track years before you retire.

In retirement, the smartest version of the rule adds flexibility. Morningstar’s research found that retirees willing to adjust their spending — skipping the inflation raise after a bad market year, trimming withdrawals when the portfolio drops — can safely start near 6%. This “guardrails” approach captures far more spending than the rigid rule while keeping the same safety margin.

Two other levers matter. The first is when to claim Social Security: every year you delay benefits past your full retirement age raises your check, and a larger guaranteed income means you lean less on portfolio withdrawals. The second is simply knowing your real number — the average Social Security check covers only part of a typical retirement budget, and the gap between that and your spending is what your 4% withdrawal actually has to fill.

The 4% rule has survived 30 years for a reason: it turns an overwhelming question into a number you can act on. Just remember it is the start of a retirement income plan, not the whole plan.

Sources: William Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning, 1994; William Bengen, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More (Wiley, 2025); Morningstar, The State of Retirement Income: 2026. Figures current as of May 2026.