{"id":159538,"date":"2025-09-21T16:02:10","date_gmt":"2025-09-21T16:02:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/159538\/"},"modified":"2025-09-21T16:02:10","modified_gmt":"2025-09-21T16:02:10","slug":"heres-how-much-the-man-who-invented-the-4-rule-actually-spends-in-retirement-spoiler-its-more-than-4","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/159538\/","title":{"rendered":"Here\u2019s How Much the Man Who Invented the 4% Rule Actually Spends in Retirement (Spoiler: It\u2019s More Than 4%)"},"content":{"rendered":"

\"\"By Josh Katzowitz<\/a>, WCI Content Director<\/p>\n

While WCI readers could spends weeks or months (or years!) debating how much you can withdraw from your nest egg when you retire, the guideline that is (sort of) universally accepted is the 4% rule<\/a>, developed by Bill Bengen in 1994<\/a> that basically says you can withdraw 4% of your portfolio every year adjusted for inflation and, with a high degree of likelihood, not run out of money after 30 years.<\/p>\n

\"\"<\/a><\/p>\n

Yes, the guideline, which is based on historical stock and bond performances, seems a little too simple for such a complex issue. Yes, many financial experts have poked holes in the guideline in the decades since Bengen released it into the wild. Yes, some point to the Sequence of Returns Risk<\/a> (SORR) as a potentially huge problem. Yes, some say the rule is outdated because it\u2019s based on a 50% stock, 50% bond allocation. Yes, some believe you should really only withdraw 3% or that you\u2019d be just fine withdrawing 6%.<\/p>\n

As Forbes<\/a> wrote a few years ago, \u201cThe 4% rule is simple, easy to follow, and totally misunderstood.\u201d<\/p>\n

Still, the easiest way to calculate whether you\u2019re financially independent and could probably safely retire is to take how much you spend per year and multiply it by 25. That would mean you can withdraw that 4% per year and be good to go.<\/p>\n

That means Bengen, in retirement, must spend 4% of his portfolio every year while living happily ever after. Er, not so fast.<\/p>\n

\n\u00a0<\/p>\n

The 4% Rule and Whether People Agree with It<\/p>\n

Investing guru Larry Swedroe has said that 4% isn’t all that safe<\/a>. Instead, he claimed 3%<\/a> was more appropriate if you wanted your retirement nest egg not to get cracked.\u00a0That 1% isn\u2019t some blip on your spreadsheet either. It has real-world consequences.<\/p>\n

As Dr. Jim Dahle wrote, \u201cUsing the 4% rule, if you need $100,000 in portfolio income in retirement, you need to have a $2.5 million portfolio on the eve of retirement. If you then change the number to 3%, all of a sudden, you need $3.33 million. If your original plan was to save $50,000 per year and earn 5% annualized returns to get to $2.5 million in 25 years, then you’re now left with a dilemma. You can either save another $17,000 per year, you can work an extra five years, or you can spend 25% less in retirement, none of which are particularly attractive.\u201d<\/p>\n

But other studies and theories show you could spend more than 4% and still thrive, especially if you can be flexible in retirement<\/a>.<\/p>\n

The Guyton-Klinger approach<\/a> says that 99% of retirees can start with an initial draw rate of 5.2%-5.6% before having to adjust for inflation, and ratcheting rules<\/a> could allow you to increase spending by 10% a year as long as SORR doesn\u2019t rear its ugly head.<\/p>\n

\"\"<\/a><\/p>\n

Even the 4% rule isn\u2019t capping you at 4%. The idea is to start with 4% of your portfolio just before you retire and then adjust for inflation from there.<\/p>\n

Are people really going to spend exactly 4% of their retirement portfolio every year? Almost assuredly not. But that doesn\u2019t mean you can\u2019t use it as a simple framework to determine your FI number and to decide whether you actually have enough to end your working days.<\/p>\n

More information here:<\/p>\n

The Silliness of the Safe Withdrawal Rate Movement\u00a0<\/a><\/p>\n

How to Spend Your Nest Egg \u2014 Probability vs. Safety First<\/a><\/p>\n

\n\u00a0<\/p>\n

How Much Does Bill Bengen Spend in Retirement?<\/p>\n

Bengen doesn\u2019t spend 4% of his portfolio. And in reality, it was never a 4% rule at the start. He actually found the percentage to be at 4.15%, but he rounded it down to make the number simpler.<\/p>\n

As USA Today<\/a> notes, he\u2019s also no longer looking at a portfolio consisting of an equal split of large cap stocks and US government bonds. These days, Bengen\u2019s investment portfolio consists of equities across large, medium, and small businesses, and he\u2019s broadened his horizons with international stocks and Treasury bills. He has seven asset classes now, not just two.<\/p>\n

For his new book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More<\/a>, he\u2019s also updated and increased the 4% rule. It\u2019s not the first time he\u2019s done that. When he retired in 2013, Bengen adjusted the 4% guideline and spent 4.5% of his nest egg that first year.\u00a0As he said, \u201cThat turned out to be too conservative. Because the stock market has done so well, I\u2019ve been able to adjust upward.\u201d<\/p>\n

In his new book, Bengen has made the 4% rule the 4.7% rule. But he spends more than that. He\u2019s actually now at 4.9%.<\/p>\n

More information here:<\/p>\n

Fear of the Decumulation Phase in Retirement<\/a><\/p>\n

A Framework for Thinking About Retirement Income<\/a><\/p>\n

\n\u00a0<\/p>\n

How Much Should You Spend in Retirement?
\n\"\"<\/a><\/p>\n

Whether you spend 3%, 4%, 5%, or 10% per year in your retirement, I suspect that almost all of us are going to be nervous about outliving our money no matter what. As Morningstar\u2019s Christine Benz discussed in her WCICON23 keynote<\/a> (by the way, she\u2019s back for WCICON26<\/a>!), figuring out what to withdraw in retirement is the hardest problem in all of financial planning. After all, you don\u2019t know what inflation will be like, you don\u2019t know how stocks will perform, and you don\u2019t know how long you\u2019ll live. Everything that\u2019s unknown can be scary.<\/p>\n

Making matters worse, a 2023 Fidelity study showed that 52% of people who were surveyed felt like they were not on target for retirement and \u201cface modest to significant adjustments to their planned retirement lifestyle if they don\u2019t take action to make up for the shortfall.\u201d<\/p>\n

But perhaps if you know the man who came up with the 4% rule is now basically spending 5% per year, that should make you feel a little better, right?<\/p>\n

\u201cYeah, 4.7% . . . is a worst-case scenario,\u201d Bengen told Rethinking65.com<\/a>. \u201cThere was only one retiree in history [based on my research]\u2014retired in October 1968\u2014who encountered conditions that forced them to have a withdrawal rate that low. Over the last 100 years, the average has been 7%, believe it or not. And if you look at today\u2019s environment, even though this is not a great time to retire\u2014in terms of maximizing retirement income, because of the high stock market valuation\u2014you can still, I think, withdraw 5.25%, 5.5%. So, 4.7% is really very stingy spending; it\u2019s only for those who are so conservative they want to be sure nothing in history has gotten worse than what they may experience.\u201d<\/p>\n

\n\u00a0<\/p>\n

Money Song of the Week<\/p>\n

As we say a fond farewell to Rick Davies, the vocalist and keyboardist for progressive\/pop rock group Supertramp who died at the age of 81<\/a> earlier this month, let\u2019s take a listen to the 1975 tune, Poor Boy, which finds a dude who fantasizes about having the kind of money that would cause him to complain about the little things in life that just don\u2019t matter. Later in the song, this boy comes to the conclusion that maybe just having enough money to live on is better than having so much of it that you\u2019re not sure what life really should be.<\/p>\n

As Davies sings,<\/p>\n

\u201cI try all I can understanding all the fools\/And all their money\/When half of what they got\/You know they never will use\/Enough to get by suits me fine\/I don’t care if they think I’m funny\/I’m never gonna change my point of view.\u201d<\/p>\n<\/p>\n

Sadly, all of the money Supertramp made eventually became an issue.<\/p>\n

Three members of the classic lineup sued singer and guitarist Roger Hodgson and Davies in 2021 for ignoring an agreement made in 1977 that would entitle them to some of the band\u2019s songwriting royalties.<\/p>\n

Davies settled with the trio in 2023, but they accused Hodgson of stopping payment \u201cfrom their share of the hundreds of thousands of dollars in annual revenue starting in 2018 without explanation,\u201d according to Courthouse News Service<\/a>. Reportedly, Hodgson and Davies each received 27% of the royalties, while the other three were entitled to 11.5% apiece from the six albums released from 1973-1983.<\/p>\n

In August 2025, a US appeals court ruled<\/a> that Hodgson owed the other three members the money he hadn\u2019t paid to them. Which, if you know Supertramp’s discography, feels so logical.<\/p>\n

More information here:<\/p>\n

Every Money Song of the Week Ever Published<\/a><\/p>\n

\n\u00a0<\/p>\n

Tweet of the Week<\/p>\n

Kirby Puckett- in \u201892 I was called up 2 @mlb<\/a> + just received my 1st check. Staring at it proudly. Puck walked over + said \u201c1st big league check huh?\u201d I nodded with a smile. He reached into his pocket + pulled out a big $ roll + said \u201cu want me to cash it for u?\u201d Classic Puck<\/p>\n

\u2014 Mike Trombley (@MikeTrombley21) October 24, 2018<\/a><\/p>\n

I don’t know how much money Mike Trombley made in 1992. But in 1993, the former Minnesota Twins pitcher earned $124,000<\/a>, the equivalent of $277,000 in today\u2019s dollars. Puckett made $5.3 million that year ($11.8 million today).<\/p>\n

This is a good reminder that you can be one of the best athletes on the planet, and still, there\u2019s always going to be somebody who\u2019s way richer than you (and doesn’t mind telling you about it).<\/p>\n

Do you believe in the 4% rule? Is it too conservative or too risky? What other strategies are you thinking about for the decumulation phase in retirement?<\/p>\n

[EDITOR’S NOTE: For comments, complaints, suggestions, or plaudits, email Josh Katzowitz at [email\u00a0protected]<\/a>.]<\/p>\n

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