For a retirement of about 30 years, withdrawing 4% of your starting balance, then raising that dollar amount each year for inflation, has never run out in less than 33 years in US market history. On $1 million that’s $40,000 in the first year. That’s the finding of William Bengen’s 1994 study in the Journal of Financial Planning, and it remains the baseline most planners start from. Your own number can be lower or higher depending on how long the money must last, how it’s invested, what you pay in fees and taxes, and whether you’ll spend less after a bad year.
The safe withdrawal rate and sequence-of-returns risk entries in our glossary explain the rule and why early losses matter. This guide is about setting your own figure.
What Bengen’s study actually says
Three findings get less attention than the 4% headline, and all three matter for a real plan:
- The margin is thin. A 4.25% start could have run out in 28 years. Bengen called 5% “risky” and 6% or more “gambling.”
- Too little in stocks shortens the money’s life. He found 50% to 75% in stocks the best starting mix and called allocations below 50% counterproductive. Moving to bonds to feel safe can make the money run out sooner.
- It’s before taxes. He assumed everything was in tax-deferred accounts. A $40,000 IRA withdrawal is $40,000 of taxable income, not $40,000 to spend.
Bengen also wrote that a retirement starting at 60 or younger should stay at no more than 4% in the early years, because the money needs to last longer.
What moves your number
How long the money must last. Retiring at 55 means planning for 40 years or more, which argues for less than 4%. Retiring at 72 with a pension may support more.
Fees. Advisory fees come out of the same returns you’re spending. On $1 million, an advisor charging the median 1% takes $10,000 a year, a quarter as much as the $40,000 you’d withdraw. Paying the median flat fee of $4,500 for planning instead, and investing in low-cost index funds, leaves more of the return for you. The two cost the same at about $450,000 of assets.
Taxes. Withdrawals from traditional IRAs and 401(k)s are taxed as income. Money from a taxable account is taxed only on the gain, and qualified Roth withdrawals aren’t taxed at all. The same pre-tax withdrawal rate can leave very different amounts to spend.
Guaranteed income. Social Security, a pension or an annuity covers part of the bill no matter what markets do. Social Security rises with inflation each year (2.8% for 2026). The more of your basic costs these cover, the more variation your portfolio withdrawals can tolerate.
Flexibility. The 4% rule assumes you spend the same real amount every year regardless of markets. Most people don’t. A plan that trims spending after a bad year can support a higher starting rate.
Four ways to set the withdrawal
| Method | How it works | The trade-off |
|---|---|---|
| Fixed, raised for inflation | Bengen’s method: a set dollar amount, raised each year | Steady income, but it ignores markets |
| Fixed percentage | The same percentage of each year’s balance | Never runs out, but income swings with markets |
| Guardrails | A starting rate, cut or raised when it drifts outside a set band | Higher start, with occasional pay cuts |
| Income floor | Guaranteed income covers basic costs; the portfolio pays for the rest | Security for essentials; annuities cost money and flexibility |
The IRS gives a fifth reference point. Required minimum distributions, which start at 73, use a table that divides each IRA’s balance by a life-expectancy factor. The share rises with age:
The required amount is a minimum, not a spending recommendation, but it shows why a higher rate becomes reasonable later in life: fewer years remain to fund. See the glossary entry on RMDs.
Which account to draw from
The order matters almost as much as the amount. Spending from a taxable account first lets tax-deferred accounts keep growing, but can leave a large IRA, and large required distributions, later. Drawing some from the IRA each year, or making Roth conversions in low-income years, can even out the tax bill. Income also sets your Medicare premiums: in 2026 Part B costs more above $109,000 of income for a single filer ($218,000 joint), based on your return from two years earlier. Our guide to going on Medicare covers those lines.
Common mistakes
- Treating 4% as a guarantee. It’s the worst case from one country’s history, built for 30 years and fixed spending.
- Forgetting fees and taxes. A 4% pre-tax withdrawal with a 1% advisory fee is a very different plan from 4% after both.
- Going too conservative after a scare. Bengen’s own data showed that dropping below half in stocks shortens how long the money lasts.
- Raising spending after a few good years. Bengen warned against clients who did well early increasing withdrawals too much.
- Ignoring the first five years. Losses then, while you’re withdrawing, do the most lasting damage.
Questions to ask a planner
| Ask | A good answer includes |
|---|---|
| What withdrawal rate are you using for me, and why? | A rate tied to your age, horizon and guaranteed income |
| Is that before or after taxes and your fee? | Both figures |
| What happens if markets fall 30% in my first two years? | The plan rerun with a bad start, and the spending cut it would take |
| What would make you raise or lower my withdrawals? | Clear rules, decided in advance |
| What does your Monte Carlo analysis assume? | Return, inflation and fee inputs, and what counts as failure |
When a fee-only advisor is worth it, and what it costs
Setting the withdrawal rate is a good use of paid advice because the stakes compound for decades and the inputs, taxes, Social Security, account order, are specific to you. A fee-only planner isn’t paid more for keeping more money invested with them or for selling you an annuity.
A one-time plan costs a median $2,000 (middle half $845 to $3,600). Hourly planners charge a median $300 to review a withdrawal plan you’ve built. Ongoing planning, a median $4,500 a year, suits people who want the rate reset each year as markets and tax rules move. If you’re weighing a percentage-of-assets advisor, see what that costs at $1 million and $2 million.
How to find one
Look at advisors for retirees, the list of retirement planning specialists, or the retiree audience page. If most of your money is in one stock, the concentrated positions specialty fits better. Ask each advisor for your withdrawal rate before and after taxes and fees, and how they’d change it after a bad year.