If you've ever Googled "how much do I need to retire," you've probably encountered the 4% rule. It's one of the most widely-cited guidelines in retirement planning — and for good reason. It gives you a simple, actionable number to aim for.
But what exactly is it, and does it still work in 2026? Let's break it down.
What Is the 4% Rule?
The 4% rule states that you can withdraw 4% of your retirement portfolio in your first year of retirement, then adjust that amount for inflation each year after, and your money should last at least 30 years.
It was developed by financial planner William Bengen in 1994, based on historical stock and bond market returns going back to 1926.
The Simple Math
To find your "retirement number," multiply your desired annual retirement spending by 25:
- $40,000/year spending → Need $1,000,000 saved
- $60,000/year spending → Need $1,500,000 saved
- $80,000/year spending → Need $2,000,000 saved
- $100,000/year spending → Need $2,500,000 saved
The "multiply by 25" shortcut works because 1 ÷ 0.04 = 25.
Does the 4% Rule Still Work in 2026?
The 4% rule has faced criticism in recent years. Here's what you should know:
Arguments that it still works:
- Historical data shows a 4% withdrawal rate survived every 30-year period since 1926, including the Great Depression, stagflation of the 1970s, and the 2008 financial crisis.
- Bengen himself later updated his research and suggested 4.5% might be safe.
- Long-term stock market returns have historically averaged 10% before inflation.
Arguments for being more conservative:
- Bond yields have been historically low in recent decades, reducing portfolio returns for conservative investors.
- Retirement could last longer than 30 years if you retire early or live into your 90s.
- Healthcare costs in the US continue to rise faster than general inflation.
- Some financial planners now recommend a 3.3% to 3.5% withdrawal rate for added safety.
How to Apply the 4% Rule to Your Situation
- Estimate your annual retirement expenses. Include housing, food, healthcare, transportation, entertainment, and travel. Don't forget taxes.
- Subtract guaranteed income. Social Security, pensions, and annuities reduce how much you need from savings. If you need $60,000/year and Social Security covers $24,000, you only need $36,000 from your portfolio.
- Multiply by 25. $36,000 × 25 = $900,000. That's your target portfolio size.
- Add a safety margin. Consider targeting 28× or 30× instead of 25× for extra cushion.
Flexible Withdrawal Strategies
The 4% rule assumes fixed withdrawals. In practice, most retirees adjust spending based on market conditions. Here are two popular flexible approaches:
- Guardrails strategy: Increase withdrawals by 10% in strong market years, decrease by 10% in bad years. This dramatically improves portfolio survival rates.
- Bucket strategy: Keep 2–3 years of expenses in cash/bonds, rest in stocks. Draw from the cash bucket during downturns so you never sell stocks at a loss.
Calculate Your Number
The 4% rule gives you a starting point, but your actual retirement needs are personal. Use our Retirement Savings Calculator to model your specific situation — including employer matches, Social Security, inflation, and different return assumptions.
You can also check your Net Worth Calculator to see where you currently stand and how close you are to your target number.