What is the 4% rule, and is it right for me?
The 4% rule says you can withdraw 4% of your savings in your first year of retirement, then adjust that dollar amount for inflation every year after, and your money should last at least 30 years. It’s a historical rule of thumb, not a guarantee — and it was built around a 30-year retirement, not necessarily yours.
Where it came from
Financial planner William Bengen published the original research in 1994, testing how a 50/50 stock and bond portfolio would have held up over every 30-year retirement starting between 1926 and the early 1990s — including retiring right before the worst market and inflation stretch in that period. His conclusion: a first-year withdrawal rate of just over 4%, adjusted for inflation every year after, never ran out of money in 30 years. The industry rounded his 4.15% down to a clean “4%.”
How it works, mechanically
With $500,000 saved:
- Year 1: withdraw 4% = $20,000
- Year 2: withdraw $20,000 plus that year’s inflation (say 3%) = $20,600
- Year 3 and on: keep adjusting the dollar amount for inflation, not recalculating 4% of a new balance
What it doesn't account for
- A retirement longer than 30 years.Retire at 55 and live to 95, and you need the money to last 40 years, not 30 — the original research doesn’t cover that stretch.
- Taxes. The 4% rule describes what you withdraw, not what you keep — see how taxes work in retirement.
- Government benefits.It’s a rule for your savings alone — Social Security, CPP, and OAS cover part of your spending separately and reduce how much your savings need to do.
- Your real portfolio. It was built on a specific 50/50 stock-and-bond mix. A different mix, different fees, or a different market stretch changes the safe number.
Is it right for you?
Treat 4% as a reasonable starting estimate, not a promise. If you’re retiring younger than most, a lower withdrawal rate (3% to 3.5%) is more conservative for a longer stretch. If your spending drops in later years, or you have guaranteed income covering most of your needs, 4% can be more cautious than you need. The honest answer depends on your own time horizon, benefits, and spending — which is what When Can I Retire actually calculates, instead of applying one flat percentage to everyone.
Try it with your own numbers.
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Check for freeLast checked: October 2026
When Can I Retire is education, not financial advice.