3 Signs You Shouldn't Follow the 4% Rule in 2026
Key Points
The 4% rule has you withdrawing 4% of your nest egg your first year of retirement and adjusting future withdrawals for inflation.
It may not be a good rule to follow if you're retiring early or late.
A conservative portfolio may not be able to sustain a 4% withdrawal rate through the years.
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If you're retiring in 2026, you may have different income sources at your disposal. One might be Social Security, which you can claim once you turn 62. And ideally, you'll have a nice amount of savings on top of those monthly benefits.
It's important to manage your nest egg wisely so that money lasts as long as it needs to. And to that end, some financial professionals might suggest the 4% rule as a starting point.
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With the 4% rule, you withdraw 4% of your retirement account balance your first year of retirement. You then adjust future withdrawals for inflation.
It's a good rule of thumb for a lot of people to follow. But it may not be right for you if any of these scenarios apply.
1. You're retiring early
The 4% rule is said to lead to a strong probability of savings lasting for 30 years. But if you're retiring early, you may need your money to last even longer than that, in which case you may want to stick with a smaller withdrawal rate.
Let's say you're retiring at 59 and 1/2 this year, since that's the earliest age you can tap an IRA or 401(k) without a penalty. If you're in great health and have a family history of longevity, you may end up living well into your 90s. But in that case, you may need to get more than 30 years out of your savings, making a 4% withdrawal rate a bit too aggressive.
2. You're retiring late
Just as the 4% rule may not be appropriate for you if you're retiring early, so too might you want to reconsider if you're retiring late. It may be that you worked until age 70 so you could delay your Social Security claim as long as possible for the largest possible monthly benefit. If so, you may not need 30 years out of your savings.
In that scenario, sticking to a 4% withdrawal rate may not hurt you financially per se. But you may have the leeway to withdraw a considerably larger percentage of your portfolio. And if that lends to a better quality of life, why not do it?
3. Your portfolio is very conservative
The 4% rule assumes that your portfolio has a relatively even mix of stocks and bonds. But if you're extremely risk-averse, you may have little to no money invested in the stock market as a retiree.
If that's the case, you may want to stick to a lower withdrawal rate than 4%. If your portfolio is mostly cash and bonds, it may not generate the income needed to sustain a 4% withdrawal rate for many years.
The 4% rule may be applicable to a lot of people. But if you're planning to tap your savings this year, don't assume it's the right withdrawal strategy for you. Instead, work with a financial advisor to come up with the best approach to tapping your nest egg based on your retirement age, investment mix, and personal spending needs and goals.
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