Updated 1 October 2026 · 6 min read
The 4% Rule and Safe Withdrawal Rates: How Much Can You Withdraw?
Short answer
The 4% rule says you can withdraw 4% of your portfolio in the first year of retirement and raise that dollar amount with inflation every year, and historically a diversified stock-bond portfolio lasted at least 30 years.
What the 4% rule says
Withdraw 4% of your portfolio in your first year of retirement. Every year after, raise that dollar amount by inflation — regardless of how the market did. On a $1,000,000 portfolio that means $40,000 in year one ($3,333 a month), about $41,200 in year two at 3% inflation, and so on.
Where it comes from
In 1994 financial planner William Bengen tested every 30-year period of US market history since 1926 and found that a 4% inflation-adjusted withdrawal from a portfolio of roughly half stocks and half bonds never ran out of money within 30 years. The Trinity study (1998) reached similar conclusions using a range of stock-bond mixes. “4%” became shorthand for a safe withdrawal rate.
What it looks like in numbers
$1,000,000, 6% annual return, 3% inflation, withdrawals rising 3% a year:
| Starting withdrawal | Lasts 30 years? | Balance after 30 years |
|---|---|---|
| 4% ($3,333/month) | Yes | $1.33M ($549K in today’s dollars) |
| 5% ($4,167/month) | Yes, barely | $159K |
| 6% ($5,000/month) | No — runs out after 23 years 8 months | $0 |
The highest starting withdrawal that lasts exactly 30 years in this model is $4,280 a month (5.1%). A constant 6% return is gentler than reality, which is exactly why the historical rule is lower.
Why real portfolios need a margin of safety
- Sequence-of-returns risk. Two retirees with the same average return can have very different outcomes. A crash in years one to five forces you to sell more units at low prices, and the portfolio may never recover.
- Fees. A 1% annual fee effectively cuts a 6% return to 5%.
- Longer retirements. Retiring at 55 can mean 40 years of withdrawals, not 30.
How to set your own withdrawal rate
- Open the SWP calculator (or the US version).
- Enter your portfolio, a conservative return, your inflation rate and a step-up equal to it.
- Read Plan checks — it shows your current withdrawal rate against the 4% guideline and the highest withdrawal that lasts your full horizon.
- Check the “How long will my money last?” grid at returns 2–4 points lower than you expect. If the plan still lasts, you have a margin of safety.
Flexible alternatives
- Guardrails: cut withdrawals by 10% after a bad year when your rate drifts above a ceiling; raise them after good years.
- Bucket strategy: keep 2–3 years of spending in cash or short-term bonds so you never sell stocks in a slump.
- Floor and upside: cover essential spending with guaranteed income (pension, annuity, government schemes) and run an SWP for the rest.
Your stock-bond mix drives most of the outcome, so review it every year alongside your withdrawal rate.