The 4% Rule Now Pays 4.7%: Why Bill Bengen's Updated Safe Withdrawal Rate Changes Early Retirement Math

The Numbers Changed—And Nobody's Talking About It

The 4% rule has been the default answer to retirement's hardest question for more than 30 years. Retire with $1 million, withdraw $40,000 in year one, adjust for inflation each year after, and your money should last through 30 years of retirement in virtually every historical scenario—or so the rule promised.

But the rule's creator, financial advisor Bill Bengen, has revised his research. And the update is not a minor tweak.

The maximum safe withdrawal rate is now 4.7%, according to Bengen's calculations —a 17.5% increase in what retirees can safely spend annually. That shift ripples through early retirement planning in ways worth understanding, because it changes both the math on how much you need to retire and how much flexibility you actually have.

Why 4.7% Instead of 4%?

Bengen's original 1994 research was elegant in its simplicity. His analysis pointed to a maximum safe withdrawal rate of 4.15% for the first year of retirement , but that got rounded down to 4% and stuck. His methodology: run historical market data from 1926 onward, test withdrawals against every possible 30-year retirement window, find the lowest rate that never failed.

The 1968–1998 scenario was the worst. Retiring at a stock peak just before a prolonged recession and high inflation tested the model most severely. That scenario demanded a 4% withdrawal rate; everything else could sustain higher withdrawals.

Bengen's update doesn't abandon historical data—it refines the assumptions. The original rule assumed a simple portfolio: 60% large-cap U.S. stocks and 40% intermediate-term government bonds. Real retirees hold more diversified portfolios.

Bengen made adjustments in his latest research to better reflect the asset mix that investors hold in retirement. He now assumes a portfolio with 55% in stocks, 45% in bonds and 5% in cash in the form of T-bills. Within that stock allocation, he includes large, midsize, small and micro-size company U.S. stocks, as well as some international exposure .

The result: broader diversification reduces portfolio volatility and improves historical success rates. Greater portfolio diversification has allowed him to increase the amount one has been able to withdraw safely from 4.1% in the past to 4.7% .

But There's an Important Caveat

Here's where the data tells a more complex story than the headline. Bengen calls that 4.7% rate "Universal Safemax"—the historical maximum safe withdrawal rate for all retirees. Retirees who use a 4.7% withdrawal rate may be sacrificing on average about 35% per year in withdrawals, a "considerable reduction in lifestyle," Bengen writes in his book .

That sounds paradoxical. If 4.7% is safe, why the caveat about reduced lifestyle? The answer: worst-case is not typical.

Bengen's historical data shows some retirees may be able to take those withdrawals even higher, with the average Safemax rate at about 7.1% . The distribution is heavily skewed. Most retirees—those retiring during normal or favorable market conditions—could have sustained much higher withdrawal rates. Only one scenario required the 4.7% floor.

Bengen re-ran his original research and stress-tested approximately 400 historical retirement scenarios. Only one scenario required a withdrawal rate as low as 4.7% to make the portfolio last 30 years .

What This Means for Early Retirees

The practical implication splits three ways:

One: Lower nest-egg requirement. If the safe floor is 4.7% rather than 4%, your target portfolio shrinks. Using the 4% rule, you'd need $1 million to safely spend $40,000 annually. At 4.7%, that same $40,000 requires only about $851,000. That's a meaningful difference in the years or money required to reach financial independence.

Two: Context matters more than ever. Bengen suggests that typically, a SAFEMAX between 5.25% and 5.5% appears approximately correct for today's retirees, depending on market valuations and inflation expectations at retirement. The headline number (4.7%) is the guardrail—not the target.

Retirees need to estimate their average inflation rate for their early retirement years as well as the expected Shiller CAPE (or cyclically adjusted price-to-earnings) ratio, a measure of stock market valuation that takes inflation-adjusted earnings into account . Higher valuations at retirement lower your safe withdrawal rate. Lower inflation improves it.

Three: Inflation is still the real enemy. A bear market—where stocks fall more than 20%—or high inflation early in retirement can affect the longevity of retirement portfolios, according to Bengen . The 1968 scenario worked worst not because of the recession, but because inflation compounded throughout retirement, forcing annual withdrawal increases to maintain purchasing power.

The Broader Conversation Around Safe Withdrawal Rates

Bengen's 4.7% sits in tension with other contemporary research. Morningstar's 2025 "State of Retirement Income" research recommends a starting safe withdrawal rate of 3.9% for those looking for a steady level of inflation-adjusted spending each year, up from 3.7% last year . The gap reflects a methodological difference: Morningstar uses forward-looking return assumptions (what assets might yield in the future), while Bengen relies on historical data (what they have yielded).

Neither approach guarantees future results. Both are educated guesses about an unknowable future. The choice between them depends partly on your tolerance for that uncertainty.

Withdrawal Rate Framework	Safe Withdrawal Rate	Methodology	Key Assumptions
Bengen (1994 original)	4.0%	Historical analysis (1926–1994)	60/40 portfolio; 30-year horizon; worst case = 1968 retirement
Bengen (2025 updated)	4.7%	Historical analysis (1926–2025)	55/45/5 diversified portfolio; 30-year horizon; worst case still ~1968
Morningstar (2025)	3.9%	Forward-looking forecasts	Current valuations and yields; 30-year horizon; 90% success probability
Bengen "typical" (not worst case)	5.25%–5.5%	Historical; conditional on market conditions at retirement	Lower valuations and moderate inflation at retirement

What This Actually Changes About Your Retirement Plan

One of the biggest changes in Bengen's philosophy is that retirees should not use a set-it-and-forget-it withdrawal strategy. Instead, retirees should review their withdrawal rate regularly . The shift from 4% to 4.7% is less important than the shift from static to dynamic thinking.

If you locked into a 4% withdrawal rate from a 2010 retirement, you may have been overly conservative by historical standards. If you're planning to retire in 2026, your safe rate depends on current market valuations and your inflation expectations over the first decade of retirement—not just the headline number.

Many retirees today may be able to withdraw between 5.25% and 5.5% without significantly increasing the risk of running out of money , Bengen suggests, but that assumes favorable starting conditions. The guardrails matter.

A Note on Risk and Time Horizon

Where a 4.0% withdrawal rate appears safe for a time frame of 35 years or less, a withdrawal rate of 3.0% or 3.5% might be warranted for a time frame beyond 35 years . Early retirees planning 40+ year retirements sit in a different risk category than someone retiring at 65.

The 30-year assumption matters. A 35-year-old retiring now faces a potential 60-year retirement. Bengen's models stop at 30 years; beyond that, the mathematics change.

Disclaimer

This article is for informational and educational purposes only and does not constitute financial advice. Safe withdrawal rates depend on individual circumstances, risk tolerance, time horizon, tax situation, and economic conditions at retirement. Consult a qualified financial advisor or certified financial planner before making any retirement withdrawal decisions. Past performance does not guarantee future results. Market returns, inflation, and life expectancy are all sources of uncertainty that individual planning must account for.