Bill Bengen Updates the 4% Rule: New Safe Withdrawal Rate Rises to 4.7%
A Major Update in Retirement Income Strategy
In a significant shift for retirement planning, Bill Bengen — the original architect of the widely known 4% withdrawal rule — has introduced a more nuanced approach to retirement income strategies. His latest research challenges long-held assumptions and offers retirees a more optimistic financial outlook.
Key Insights from Bengen’s New Research
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Updated Safe Withdrawal Rate: Bengen now suggests a safe withdrawal rate of 4.7%, a notable increase from the traditional 4% rule.
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Diversified Asset Allocation: The new model recommends a portfolio of 55% stocks, 40% bonds, and 5% cash.
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Potential for Even Higher Withdrawals: In today’s market environment, Bengen believes a 5.5% withdrawal rate could be sustainable.
The Evolution of a Financial Benchmark
What began as a simple research project has become a cornerstone of modern retirement planning.
Bengen, who holds an engineering background, initially sought to answer a fundamental question:
“How much can retirees withdraw without depleting their savings?”
As Dana Anspach, CEO of Sensible Money, notes:
“Research is supposed to be something that we continue doing. Research becomes the foundation that additional people build on.”
Bengen’s original research was based on just two asset classes — U.S. large-cap stocks and intermediate-term government bonds. His latest work expands the framework by adding additional asset classes such as micro-cap stocks, mid-cap stocks, international equities, and Treasury bills, allowing for a more sophisticated and resilient allocation strategy.
Beyond the Numbers: A Flexible Approach to Retirement Planning
Bengen emphasizes that his “rule” should not be viewed as a rigid formula but rather as a flexible guideline for sustainable retirement income.
Key Principles
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Annual Reassessment: Regularly review and adjust withdrawal strategies.
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Personalized Planning: Account for factors such as retirement age, planning horizon, and personal goals.
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Behavioral Considerations: Understand your own risk tolerance, spending habits, and emotional comfort with market volatility.
Practical Takeaways for Retirees
Actionable Advice:
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Don’t treat the withdrawal rate as a fixed number.
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Build a diversified portfolio across multiple asset classes.
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Review your retirement plan annually to adapt to market changes.
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Be willing to adjust withdrawals based on performance and personal needs.
“We are not all the same… to think that there was one perfect strategy for all of us wouldn’t make sense.” — Dana Anspach
Key Takeaways
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The traditional 4% withdrawal rule has been updated to 4.7% — and possibly 5.5% in certain market conditions.
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Diversification and flexibility are essential for a sustainable retirement plan.
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Annual reviews ensure your strategy stays aligned with your goals.
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Individual circumstances — including age, health, and spending habits — significantly affect safe withdrawal rates.
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Behavioral finance plays a major role in maintaining long-term confidence and discipline.
Conclusion
Bengen’s latest research reinforces a vital truth: retirement planning is an evolving process, not a one-time calculation.
By embracing flexibility, diversification, and ongoing education, retirees can approach their financial future with greater confidence and adaptability.