Retirement Investing Strategies and Articles

Does the 4 Percent Rule Still Apply to Retirement Withdrawals? 

by Alli Thomas

Apr 28, 2022

If you’re a retiree, you’ve probably heard that you’re especially vulnerable to soaring inflation, since it means that you’ll have to stretch your dollars further – something that can be challenging when you’re living on a fixed income.  

One of the most popular rules of thumb when it comes to retirement spend-down strategies is the 4% rule – we wrote about it just a few months ago 

This strategy suggests that, in order to not run out of money during retirement, retirees should plan to withdraw 4% of their investment portfolio in the first year of retirement. Then, in each subsequent year, the annual withdrawal rate would vary based on inflation. 

However, consumer prices in the U.S. have hit a 40-year record high. According to the consumer-price index, inflation skyrocketed by 8.5% year over year in March. 

With such a high inflation rate, many retirement planning experts say that the 4% rule isn’t feasible for the long-term retiree – including Bill Bengen, the man who created the rule back in the 1990s. There are a few reasons for this: 

  • Stock prices are historically high 
  • Bond rates are very low 
  • Inflation is rising quickly 


Before inflation took off in recent months, Bengen had gone on record to state that most new retirees could probably afford to follow a 4.7% withdrawal rate. 

But lately, he’s been giving interviews and issuing warnings to retirees to cut back on their early-retirement withdrawals, at least until there’s a clearer picture on whether this red-hot inflation will be a short-term phenomenon or if it will stick around for the long term. 

Read more: How to Prepare Your Retirement Portfolio for Inflation 

What is the new rule? 

There actually isn’t a hard-and-fast new withdrawal rate. Everyone has a different financial situation, with different considerations and different life expectancies. 

According to Bengen, retirees who followed his updated 4.7% withdrawal rule might be more comfortable by cutting back slightly to 4.4%. 

Meanwhile, other sources (such as Morningstar) say that 3.3% is the current suggested withdrawal rate. 

Wondering what the best retirement withdrawal strategy will be for you? Click here to set up a free, no-obligation consultation with an advisor and find out! 

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Alli Thomas

Alli Thomas has worked in the financial services industry for nearly 20 years, with a focus on retirement-related investing. She began her career as a FINRA-licensed participant-services call-center associate at Vanguard, and then moved to Principal Financial Group, where she worked closely with employers, assisting with retirement plan set-up and design, selecting appropriate plan investment offerings, and maximizing employee participation through targeted education campaigns and enrollment meetings. Alli has also worked as a qualified 401(k) administrator and registered investment advisor for several small investment firms. She now writes about all things investment- and finance-related, leveraging her extensive experience and passion for retirement planning to help investors make well-informed financial decisions.

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