The 4% rule: what it really says and why newer research is more cautious

The rule is simple. In your first year of retirement you withdraw 4% of your savings, then the same amount each year, adjusted for inflation. On a $1,000,000 portfolio that is $40,000 in year one. Save 25 times your annual spending and that covers your spending exactly.

Where the 4% comes from

In 1994, US financial planner William Bengen used stock and bond returns and inflation from 1926 to test how long a portfolio would have lasted at different withdrawal rates, for every possible starting year. His finding: with a 4% starting withdrawal, a portfolio of 50% stocks and 50% intermediate-term US Treasuries never ran out in less than 33 years. He recommended 50 to 75% in stocks, as close to 75% as possible.¹

Higher withdrawals were risky. At 5%, people who retired in the late 1960s or early 1970s would sometimes have had only about 20 years of money. Bengen called 5% risky and 6% or more “gambling”.¹

Why the order of returns matters

When you are withdrawing money, falling prices early on hurt most: you sell low, and the money you sold is missing when markets recover. The calculation below shows this with exactly the same 30 annual returns in two different orders. In one, the portfolio falls 25% and 10% in the first two years; in the other, in the last two. In every other year it grows 4% after inflation.⁴

• Crash in the first two years
• Crash in the last two years

Own calculation: withdrawals at the start of each year, returns and withdrawals after inflation, no taxes or fees.

Show as table

Year	Crash in the first two years	Crash in the last two years
0	1,000,000	1,000,000
5	558,558	991,334
10	454,252	980,790
15	327,349	967,962
20	172,951	952,355
25	0	933,367
30	0	564,035

The annual returns are exactly the same in both cases; only their order differs. Yet one portfolio runs dry in year 25, while the other still holds $564,035 at the end.⁴

What newer research shows

Bengen’s figures rest on US data alone. A study published in 2025 analyzed returns from 38 developed countries. Their result: a couple aged 65 who want no more than a 5% risk of running out of money during their lifetime can withdraw only 2.31% a year, well below the 4% rule.²

Morningstar recalculates the safe withdrawal rate regularly, using forecasts for returns and inflation. At the end of 2025 it arrived at 3.9% as the highest safe starting withdrawal for 30 years, with a 90% probability of success and 30 to 50% in stocks. If you are willing to adjust spending with the markets, Morningstar says you can start close to 6%.³

What this means for your plan

The 4% rule is a good first guide, but not a promise. The longer your retirement might last and the less flexible your spending, the more cautiously you should plan. Being willing to withdraw less in bad years buys a lot of room. And because every fee comes straight out of what you can withdraw, it pays to look at costs, as our article on fund fees shows.

Savings target calculator

Currency

CHFEURUSD

Spending per year in retirementCHF

Pensions and other fixed income per yearCHFIncome that lasts for life, such as a state or company pension.

Under the 4% ruleCHF 800,000More cautious, with data from 38 countries: CHF 1,385,000

To be covered from savings: CHF 32,000 a year

	Withdrawal	Multiple	Savings
4% ruleBengen 1994, US data, 30 years	4.0%	25.0×	CHF 800,000
Morningstar 202530 years, 90% success	3.9%	25.6×	CHF 821,000
38 countriesAnarkulova 2025, couple from 65, 95% success	2.31%	43.3×	CHF 1,385,000

Assumes the income starts in the first year of retirement. If a pension starts later, you need more.

The retirement planner calculates this in more detail

Your entries stay in this browser only.Open as its own page