The Father of the 4% Rule Says Retirees Can Withdraw More

In this reaired 2025 episode of Motley Fool Hidden Gems Investing, Motley Fool retirement expert Robert Brokamp interviews William Bengen, father of the 4% withdrawal rate, about his book A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More. They discuss:

• How factors such as market valuation and inflation affect the safe withdrawal rate.
• Whether retirees should decrease or increase their allocation to stocks as they get older.
• Bengen’s suggested withdrawal rate for current retirees.

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A full transcript is below.

This podcast was recorded on July 25, 2026.

Robert Brokamp: The father of the 4% rules says that retirees can likely take out much more. You're listening to the Saturday Personal Finance edition of The Motley Fool Hidden Gems Investing podcast. I'm Robert Brokamp, and I was on vacation this past week, so we're re-airing my interview with Bill Bengen from last August.

Bill and I talk about his latest book, why most retirees can withdraw more than 4%, how factors such as market valuation and inflation affect the safe withdrawal rate, and whether retirees should decrease or increase their allocation to stocks as they get older. If you ask a typical investor how much someone can safely withdraw in the first year of retirement, the answer they'll likely give is 4%. That rule of thumb has been around since 1994, thanks to the research report published by a financial planner named William Bengen. The subsequent three decades, Mr. Bengen has done a lot of additional research, which he has summarized in his excellent new book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More. Bill, welcome to Motley Fool Money.

Bill Bengen: Hey, thanks for inviting me. I'm looking forward to it.

Robert Brokamp: We're looking forward, too. Let's start with a little bit of your history. You got a degree in aeronautics and astronautics from MIT. But instead of working in the space industry, you joined a family-owned soda bottling business and eventually became the president. The company was sold in 1987, and you started a whole new career in your 40s as a financial planner. What led you to the financial planning profession and then eventually your research into withdrawal rates?

Bill Bengen: Well, I never used a financial advisor, and it was still a new concept at that time. I figured that if I was going to have to deal with a lot of this stuff, it wouldn't hurt me to learn about it. Then once I've learned it, perhaps the offer my service to others to give advice. I just seemed like a very appealing feel to me because it's an area where you can make a difference every day in people's lives.

Robert Brokamp: Then from there, you had to determine a lot of your clients were boomers, not quite yet in retirement, but getting close. I'm sure they asked you, all right, how much can I spend in retirement? You looked for an answer, and you couldn't find one.

Bill Bengen: Yeah, I looked through all the literature. You know, it's not like today where we go on the Internet, type in a few words, and there's thousands of sources of information. Back then, it was a library and talking to friends and associates, and nowhere could I find the answers to the questions. Probably not surprising since that issue really hadn't been of importance up until the early 90s when people were starting to live longer in retirement than the baby boomers were thinking living into their 90s unheard of, back in the ‘50s, you'd retire at 65 and 10 years, you'd die and that was it. But when you're living 85, 90, or more, it creates a whole new host of issues.

Robert Brokamp: You fired up your Lotus one, two, three spreadsheet, bought some data, figured it out. Your initial research found that the maximum, which you call the Safemax, was 4.15%. Then you moved it up to 4.5% after doing additional research, that you published a book in 2006. It's been above 4%, really, since the beginning, yet the term 4% rule has stuck. It is now widely referenced. What was it like to see your research become so well known, but also be given a name that's outdated and doesn't really quite capture all the nuance and depth to your research.

Bill Bengen: It led to mixed feelings on my part. It was fun to see my name out there and associate with this research, I had no idea what to expect. But the 4% rule, as it's been formulated applies to such a small number of retirees. Almost every other retiree can aspire to take out more than that and should look at that. They should not adopt that off the cuff to start their plan.

Robert Brokamp: With your recent research, you have moved up the Safemax to 4.7%. What are the biggest factors that have resulted in your increasing the number over the years?

Bill Bengen: Primarily, I've made my portfolios more sophisticated. I started out with just two assets all up to seven assets now. Probably still not what some would consider a well-diversified portfolio, but it's getting there. Higher means my research still understates the true withdrawal rate by a little bit. I suspect number 4.7 could eventually become five throwing gold and commodities emersion markets, alternative investments and Bitcoin, digital currency, who knows what can go on the portfolio today?

Robert Brokamp: As you point out, the Safemax of 4.7%, it's almost like a worst-case scenario. It would have survived the worst conditions since 1926. As you say, the majority of retirees would have been able to take out more, in some cases, much more. What would have been the withdrawal rates if you look at maybe an average case scenario or even maybe a best case scenario?

Bill Bengen: Sure, across 100 years of retirees, the average has been a little bit over 7%, which surprises people a lot because they're stuck on a 4% rule, and all of a sudden 7% is an average. There are people who are able to take out double digits. Of course, if you retire in July of 1932 and the stock market goes off 100% the next quarter, you're off for a very good start with your retirement plan. That's what happened. That's where people got 15%, 16% withdrawal rates. Not realistic to expect anything like that today, but I think we can do a lot better than 4.7% in this environment.

Robert Brokamp: In your book, you do provide success rates of other withdrawal rates. Withdrawing 5.5% did not deplete a retiree's portfolio in 90% of historical periods. A 6% withdrawal rate was successful 75% of the time. As you point out, a 7% withdrawal rate was about the average, so around a 50/50 success rate there. You've done more recently is try to find clues that would help retirees determine whether they could take out more than 4.7% and enjoy more of their money in retirement, and also when they should play it safer. You eventually came across the research of financial planning expert, Michael Kitces, who documented a relationship between stock market valuations and the Safemax. Tell us about that.

Bill Bengen: Michael's a good friend and a brilliant guy. Back in 2008, he published in his newsletter, a chart which tracked the valuation of the stock market using the Shiller CAPE. They adjusted PE ratio against withdrawal rate on the other end of it. When you take a look at those two charts, they seem like when one's going up, the other goes down, and one goes down, the other goes up, appears to be a very strong correlation between stock market valuation and eventual withdrawal rate.

Robert Brokamp: You looked at that. One of the things you pointed out in your book is that, generally speaking, if the market is cheap, it's going to do OK. You point out that there was only really one bear market when the stock market was cheap. That was in the early 80s when Paul Volcker, the Federal Reserve chairman, raised rates to bring down inflation. Whereas when the market is expensive, you're more likely to see a bear market, which, of course, can be really rough on your retirement.

Bill Bengen: As a good example of that. The person retired at the bottom of the market after the great financial crisis back in April of 2009. My calculations indicate they could have taken out 8%. Because the stocks were so cheap at that time, and that's the cheapest they've been over the last 30 years. We haven't approached that since.

Robert Brokamp: You found that market valuation was helpful? Not a perfect predictor, though, whether retiree could enjoy a higher Safemax. Then you moved on to researching whether inflation at the start of retirement was the most important factor. What did you find?

Bill Bengen: Well, I knew from the beginning inflation had a role to play because the worst-case scenario, the 4.7% was generated by the person who retired in October of 1968, and they hit two bear markets, back to back, deep ones, and then got hit with very high levels of inflation for over a decade, which forced them to increase the withdrawals. You would think, though, that 1929 through ‘32, where the stock market dropped twice as much would have been worse, but it wasn't because it was a deflating period. Actually, you were able to reduce withdrawal by 10% a year, and that offset the huge losses in the stock market and made 68 the worst case, not 32.

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Robert Brokamp: You're providing your book some what you call Safemax finder tables based on three inflation regimes: low inflation, middle inflation, high inflation. Then once you determine which inflation regime you're in, then you look up the cape ratio, and that gives you a hint of what could be your Safemax, although you point out in the book, there are other factors to consider and we'll touch on some of them. But when you look at the chart, it implies that withdrawal rates could be as high as 6% or 7%, and that might be surprising to a lot of people.

Bill Bengen: It could be. I think in today's environment, I'd probably recommending something around 5.5. Which is low, historically, compared to the average, but it's a lot better than 4.7%, about 15% to 20% higher, which ain't chicken feed.

Robert Brokamp: We're in a medium-inflation environment, but I’m assuming you recommend that withdrawal rate because the CAPE is so high. At this point, about the second-highest level it's ever been.

Bill Bengen: Of course, if the inflation rate were to take off, and we enter a period like the ‘70s, that would reduce the withdrawal rate significantly. Don't know what's going to happen in that picture. It looks like, for the time being, inflation is at a reasonable level, but who knows?

Robert Brokamp: These days, I think there is more awareness of the impacts of a bear market, maybe right before retirement, but especially right after retirement, and your research bears that out. Tell us about why what happens in that first decade of retirement is so important.

Bill Bengen: Sure. Well, if you encounter a bear market, early retirement, and your portfolio drops 30% compared to another portfolio which might have been making gains, you're behind the eight ball, and you never really catch up. That early stock market declines reduce withdrawal rate very significantly.

Robert Brokamp: If you have a bear market, say, in your 20th year of retirement or 25th year of retirement, at that point, your research indicates that's, of course, not great, but chances are you're still going to be OK.

Bill Bengen: Yeah, usually by the first 10 to 12 years, the die is cast as far as your withdrawal plan goes. The success withdrawal plan all is owed primarily to events occurring in the first 10 to 12 years. There are exceptions, people who retired in the late 50s into a low inflation environment, and within a decade, they were facing very high inflation and had to scramble to get back to plan, so events mid retirement, if they're severe enough, can affect the withdrawal rate, but not as much, usually as the early ones.

Robert Brokamp: Your book describes how a personal withdrawal plan can be developed by choosing various options among what you call eight elements. There are two other elements, which we just discussed, valuation and inflation. Then there are eight elements. We won't discuss all eight in this podcast. But the first is your withdrawal scheme. You discussed a few in your book. Tell us generally about how a retiree might use guidelines, so maybe take out a little bit more if the portfolio is doing well, but maybe cut back if the portfolio declines.

Bill Bengen: You can do those kinds of adjustments. I think a lot of people just do that naturally. I'm not going to try to fight that. I think it makes sense if your portfolio is under stress due to inflation or a bear market, that you want to take a cautious stance, cut back a little bit on spending temporarily, at least, and just wait and see how bad the situation becomes.

Robert Brokamp: Another important element is time frame. Your base case assumption is a 30-year retirement. Someone who retires at 65 would assume they live to 95, which I think is in the neighborhood of what most financial planners recommend. What about people who are retiring sooner maybe in their 50s, maybe a little sooner? Or what if they're already in their 70s or older?

Bill Bengen: Sure. The withdrawal rate is very sensitive to the planning horizon. If we use 30 years as a midpoint standard, 4.7% is the associated withdrawal rate. If you, let's say, have a 10-year horizon, your withdrawal rate probably around 8%, believe it or not, because you only have 10 years to deal with, and you shouldn't have a lot of stocks, probably, at that point. One of the interesting features of the planning horizon is that the withdrawal rate drops as the length of planning rise increases, but eventually reaches a point where it doesn't decline anymore, it reaches the floor. For the 4.7% rule, let’s say, a 60-year-old would be 4.1%, and it wouldn’t get much slower than that for 80, 90, 100 years, as far as I can tell.

Robert Brokamp: You also looked at how asset allocation affects safe withdrawal rates, and you kind of settled on a base case allocation for a lot of your illustrations, your book, 55% stocks, and those stocks are allocated amongst five asset classes. It's large cap, small caps, mid caps, micro caps, and international, then 40% intermediate government bonds and 5% T-bills. Generally speaking, though, how does asset allocation, especially the stock and non-stock split, affect withdrawal rates?

Bill Bengen: There's a certain minimum percentage of stocks you need to have in your portfolio to get the highest withdrawal rate you can. However, if you try to raise stocks to too high level, it may be counterproductive because during a major bear market, your portfolio could lose 50% or more, and that's tough to come back from in any reasonable time frame. That's the nature of the beast.

Robert Brokamp: A good range is around, what would you say is a minimum stock allocation, and then maybe a maximum that most people would be appropriately using?

Bill Bengen: I think most people can handle at least 50, and I'm doing research right now that indicates that it may be better to have more than 55, 40. Maybe we should be at 65. I read a model right now. At 65% stocks, and it's generating higher withdrawal rates than they would have been under my earlier analysis. I'm still learning here, and as soon as I get a conclusion, I will pass it along. But I think higher stock allocations are probably beneficial. You just have to be careful. You don't want to have stock allocation. When you retire, and you know you're going to have a big bear market, or likely to have one. It's probably best to be a little conservative and then after the smoke clears, go to your higher allocation.

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Robert Brokamp: I thought one interesting insight from your book was that you include the safe withdrawal rate for a simple two-asset portfolio of bonds and large-cap stocks, and the Safemax really starts to tail off at allocations above 75% stocks. But then when the stock allocation is more diversified with five categories of stocks, not only does it boost the safe withdrawal rate, but the drop off beyond 75% isn't nearly as sharp. It's an excellent illustration of the power of diversification.

Bill Bengen: I think you're absolutely right.

Robert Brokamp: I should point out, too, that you also examined the allocation between cash and bonds. In your case, bonds were intermediate-term government bonds. There's a pretty linear relationship between that cash bond split and the safe withdrawal rate. The more cash equals a lower rate.

Bill Bengen: That's right, because cash doesn't pay much. It's not very volatile, but today it's better than it was, let's say, five, six years ago when I was playing factory zero. But you're not going to get a good withdrawal rate, having a lot of money and assets generating just 4%.

Robert Brokamp: Let's move on to portfolio management. You looked at how often retirees should rebalance their portfolios but also whether they should be decreasing or increasing their stock allocations over the course of their retirements. Let's start with the rebalancing question. How often do you think folks should be rebalancing, which is basically moving back your portfolio to some originally intended allocation?

Bill Bengen: To a certain extent, it depends upon the retirees circumstances whether they retire into a bull market or a bear market. But overall, looking across all 400 retirees I study, a period of about one year appears to be optimum. It may not always generate the highest withdrawal rate, but we don't know in advance what rebalancing interval will generate through it. One year seems to work pretty darn well in the vast majority of cases.

Robert Brokamp: Talk a little bit about your analysis of whether people should be decreasing their stock allocation as they go through retirement or whether it actually makes sense to increase their allocation to equities.

Bill Bengen: I tested a scheme that was developed by two fellow advisors, Wade Pfou and Michael Kitces. Back about 10 years ago, they published a paper in which they investigated, starting with a low stock allocation, let's say, 30%, 40%, and then increasing it one or 2% a year during retirement. Their conclusion, surprisingly, was that had a beneficial effect on withdrawal rights. You gave them a bump. It wasn't huge, but it was significant, worth considering. I suspect their conclusion is correct that the reason this pierced counter intuitive thing seems to work, is that because when you're in a bear market early in retirement, you're going to find out a lower stock allocation is beneficial. You will lose less. Meanwhile, after the bear market is over, you're increasing your stock allocation. You're buying stocks aggressively into a rising market, which can only help you.

Robert Brokamp: Let's move on to our final question here, Bill. You are an internationally recognized retirement expert, but you've also been retired yourself for more than a decade. How's it going? Were there any bigger surprises? Do you have any recommendations, financial or otherwise, for those who are preparing to make the transition from work to retirement?

Bill Bengen: Well, I'm really enjoying retirement. I went into the mindset that there are four things that are important family, friends, your health, and passions, hobbies, interests. If you cultivate all four of those, not only your retirement, during your whole life, I think you'll have a very successful life and a very satisfying one. But I find once you let one lapse, it starts to affect the quality of your life.

Robert Brokamp: That is excellent advice. Bill, I first interviewed you almost 20 years ago, and ever since I've peppered you over the years with so many random questions, and you've always replied with thoughtful responses. I just like to thank you personally for being so generous with your research over the years, and to congratulate you on the new book. I highly recommend it. Thank you so much for joining us.

Bill Bengen: My pleasure. Thanks for inviting me.

Robert Brokamp: That's the show. As always, people on the program may have interest in the investments they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. See our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody.

Robert Brokamp, CFP, EA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.