If you’re nearing or in retirement, you may have heard of a common planning shortcut called the “4% Rule.”
Though not technically a rule, this formula has been used widely since its development in the 1990s by financial planner William Bengen. The idea is simple: withdraw 4% of your savings each year, adjust for inflation, and you could retire with confidence that your money would last 30 years.
Now, this formula is making headlines again—this time with a twist. Its original creator recently recalculated the number upward to 4.7%, based on updated market research.
So… does this mean your retirement paycheck just got a raise?
Not exactly.
🎧 Prefer to listen? We’re breaking down what’s really changed—and what this means for your personal retirement plan—in this week’s episode of Re-Engineering Your Finances:
“Retirement Breaking News: The ‘4% Rule’ Gets a Makeover” — now streaming on Apple Podcasts, Spotify, or wherever you listen.
The Basics: Where the “4% Rule” Came From
Bengen analyzed decades of historical U.S. market data and concluded that a retiree with a balanced 50/50 stock-bond portfoliocould safely withdraw 4% per year, adjusted for inflation, and not run out of money over a 30-year retirement—even in worst-case scenarios.
The formula was never meant to be perfect. But it gave people a simple benchmark in a sea of uncertainty.
The 2025 Update: From 4% to 4.7%
Now, Bengen is suggesting that with a 55/45 stock-bond mix, broader asset diversification, and modern tools like regular rebalancing, retirees may be able to safely start at 4.7%withdrawals.
That sounds like a win—especially in an increasingly volatile economic landscape where every dollar of retirement income counts.
But before you pop the champagne, take a pause: just because you can theoretically spend more doesn’t necessarily mean you should.
Why Bigger Isn’t Always Better
The updated 4.7% figure is based on historical data and theoretical models. It doesn’t consider the real-life curveballs that today’s retirees face, such as:
· Market volatility: A downturn early in retirement (what we call “sequence of returns risk”) can do lasting damage if you’re drawing income at the same time.
· Longer lifespans: Many people need their money to last 35 years or more, especially if they retire early or live well into their 90s.
· Inflation risk: Even a few years of high inflation can quickly erode your purchasing power—especially for retirees on a fixed income.
· Taxes: The generalized 4.7% calculation doesn’t account for where your money is coming from—whether that’s a traditional IRA, Roth account, or brokerage account—all of which can impact how much you actually keep.
In other words: the update to this generic rule of thumb may sound like better math, but it’s still just that—math. A rule of thumb is not a stand-in for a personalized strategy.
Because at the end of the day, what really matters in planning your retirement isn’t what works on average—it’s what works for you.
So…What Should You Do About It?
If you’re wondering whether this new number means you need to update your entire retirement plan, the short answer is: not necessarily.
This might be a great time to revisit your plan, even if you don’t rewrite it—because while the real takeaway might not be “withdraw more,” it may very well be plan smarter. That means building in:
- Flexibility: Your plan should be built to adapt to markets, tax laws, and your changing needs.
- Structure: It’s important to have a system designed to safeguard your short-term income while giving your long-term money room to grow.
- Tax awareness: Sometimes the biggest threats to your nest egg aren’t investment-related, but tax-related—and a solid retirement plan is one that accounts for that.
That’s Where Our Process Comes In
At The CP Welde Group, we go beyond generic rules of thumb. Using The Bucket Plan®,we segment your savings into Now, Soon, and Later money—so you're never forced to sell volatile assets in a downturn just to pay your bills. We also make sure your plan is tax-optimized, which can help avoid unwanted tax surprises and keep more of what you’ve worked so hard to earn.
The bottom line is, there’s no universal number that works for everyone. The right withdrawal rate for you depends on your lifestyle goals, health and longevity expectations, tax situation, investment mix, and risk tolerance. That’s where working with a fiduciary financial advisor can make all the difference.
If you’re ready to find your own safe withdrawal rate, let’s talk. Book your complimentary call with us now and let’s find the right formula for you.
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