By Antonio Hill
After taking your target annual spending, multiplying it by 25, and getting some number that felt like it was three decades away, somewhere in the back of your head, you started wondering if early retirement was actually possible for you or just something other people do.
That number is wrong. This isn’t my controversial opinion. It’s math, it’s data, and it’s history.
The 4% rule is the problem. Most people treating it like gospel do not know where it came from, what it was actually designed to do, or the fact that even the guy who invented it has publicly said people are using it incorrectly. The 4% rule is too conservative, and it is inflating the number you think you need to retire.
Where the 4% Rule Actually Came From
William Bengen published his research in 1994. That is not ancient history, but it is also not yesterday, and a lot has changed about how markets actually perform. Bengen was a financial planner trying to answer a simple question. How much can a retiree pull from their portfolio each year without running out of money?
He ran historical market data going back to 1926. He tested every 30-year retirement window he could find. And he landed on roughly 4% as the highest withdrawal rate that never failed across every single one of those windows, including the worst market runs in American history. The binding one was not the Great Depression, which deflation actually softened. It was the person who retired in the late 1960s, right as stagflation hit returns and prices at the same time. That scenario set the limit.
The key word is worst case. The 4% rule was designed as a floor, not a target. It answered one question. What is the absolute worst it could get, and could you still survive? And his original study ran on a portfolio of 60% stocks and 40% bonds, large-cap US stocks paired with intermediate-term government bonds. Not an aggressive, stock-heavy portfolio. A moderate mix built for someone who was already 65 and needed to protect what they had.
You are not 65. You are probably in your 30s. And if you are serious about early retirement, you are not holding 40% bonds.
The Man Who Invented It Just Raised the Number
Here is the part that should change how you think about all of this. Bengen himself, in his 2025 book “A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More,” updated his own research and lifted the safe withdrawal rate to 4.7%.
But that is not even the most important thing he said.
Bengen now calls 4.7% the “Universal Safemax,” meaning it represents the worst-case scenario across all historical retirement periods, not the standard rate most retirees should use. Bengen is blunt that most people misuse it. Plenty of retirees, he writes, “cheated themselves by defaulting to the Universal SAFEMAX.”
Read that again. The worst case. The floor. The number that survived the single most brutal retirement scenario in recorded financial history.
His updated research found that the average SAFEMAX across all 349 retirement scenarios he tested was approximately 7.1%. Seven point one percent. The average. Meaning in a lot of historical retirements, you could have pulled more than 7% per year and still been fine. The catch, and Bengen says this plainly, is that those high numbers leaned on good returns early and tame inflation. Get a bad first decade and the safe number drops dramatically.
Bengen is specific about today. A SafeMax “between 5.25% and 5.5% appears approximately correct,” he says, and he sees no need to drop all the way to the 4.7% number “unless inflation again becomes a serious problem.”
So the man who created the rule, after 30 years of additional research, is telling you that the 4% rule is too conservative. And yet most people planning for early retirement are still treating it as their hard ceiling. They are building their entire financial independence number around a figure that even its inventor has walked back.
What This Actually Does to Your Number
Let me show you what a one or two percentage point difference in withdrawal rate actually means for how long you work.
Say you plan to spend $80,000 a year in retirement. That is a reasonable number for a high-income earner who plans to live well, not lavishly. If you have not settled on that figure yet, be warned that moving your target from $80,000 to $140,000 costs about fourteen years of work, which is a steeper price than almost anyone expects.
At 4%, you need $2,000,000. At 5%, you need $1,600,000. At 5.5%, you need about $1,455,000.
That is a $400,000 to $545,000 difference in the amount you need to accumulate before you can walk away. If you are adding $50,000 to $75,000 per year to your portfolio in contributions and returns, that gap represents five to eleven years of your life. Five to eleven years of early mornings, corporate politics, performance reviews, and doing work you tolerate instead of work you choose.
The 4% rule is too conservative, and it is a number that, if you treat it as the truth without questioning it, will silently steal years from the best chapter of your life.
I am not theorizing. I am 33, a bit under a million in investable assets, and I have a real plan to walk away around 40. The difference between a $1.6 million number and a $2 million number is years of that plan. Here is how I built the first chunk.
Before you recalculate anything, grab the free guide, 10 Quiet Mistakes That Kill Your Early Retirement. A few of them are planning errors exactly like this one, the quiet kind that add years to your timeline before you ever notice.
Three Dials That Shrink Your Number
There are three dials you can turn, and each one independently pulls your number down. Most people never touch any of them. They take the 4% rule at face value and plan around the highest possible target. Turn all three and your number can drop by a third or more.
Flex your spending in bad years
The 4% rule assumes you are a robot. It assumes you pull the same inflation-adjusted amount from your portfolio every single January, no matter what the market did that year. Market down 30%? You pull the same amount. Market up 25%? You pull the same amount. You just keep going on autopilot, completely indifferent to what is happening around you.
Nobody actually does this.
If the market drops hard in year two of your retirement, you spend a little less that year. You skip the big international trip. You eat at home more. You are not panicking, you are just adjusting the way any reasonable adult would. And that one small behavioral change, just pulling 10% less in a bad market year and skipping your inflation adjustment, is worth an enormous amount to your long-term portfolio health.
This is what the Guyton-Klinger guardrails research captures. Jonathan Guyton and William Klinger published their decision rules in the Journal of Financial Planning in 2006, and the finding was simple. Build in spending guardrails that flex up or down with your portfolio, and you can start meaningfully higher than the rigid 4% rule allows. Their numbers held up at a 99% confidence level over a 40-year retirement, with a portfolio of at least 65% stocks. The safe starting range was 5.2% to 5.6%. On a $1 million portfolio that is $52,000 to $56,000 a year instead of $40,000.
That is a 30 to 40% increase in annual spending from the same portfolio. Just by building in the flexibility to cut back modestly in rough years. Which again, every normal person would naturally do anyway.
The rule is simple. If the market tanks and your withdrawal rate rises more than 20% above where you started, you cut your withdrawal by 10% that year. If the market runs and your rate drops more than 20% below your starting point, you give yourself a 10% raise. That is it. Two rules. And in exchange for following them, you get to start retirement with a significantly higher income and end with a significantly lower portfolio balance.
Earn a little, especially early
The 4% rule assumes the moment you retire, your income goes to zero. Permanently. You produce nothing. You earn nothing. Your portfolio is the only thing standing between you and financial ruin for the next 50 years.
Think about who is actually reading this. You have spent a decade or more building real, marketable skills. You are sharp. You know how to solve problems. You have professional knowledge that other people would pay for.
The 4% rule assumes you will do absolutely nothing with any of that for the rest of your life. Not a consulting project. Not a few months of freelance work. Not a business you build around something you genuinely enjoy. Nothing. Zero income. Forever.
That assumption is almost never true for early retirees, especially high-income professionals in their 30s and 40s. Most people who retire early end up doing some kind of work, because they find things they want to do. The difference is they do it on their own terms, for their own reasons, and they do not need it to cover their full living expenses.
If you generate $25,000 to $30,000 a year from some form of part-time work for even the first 10 years of retirement, the math on your portfolio changes completely. Your portfolio does not have to work as hard. You do not have to sell equities in bad market years. The sequence of returns risk that is most dangerous in the early years of retirement essentially evaporates because your portfolio sits untouched while your income covers your expenses.
Layer that on top of a flexible withdrawal strategy and you are looking at a picture that is dramatically more favorable than the 4% rule would ever suggest.
Spend the principal down
Most people building toward early retirement are running their numbers with one silent assumption baked in that they never actually examined. They plan to preserve their principal forever. The 4% rule was literally designed around this idea. Withdraw 4%, let the portfolio keep growing, die with roughly what you started with.
Say you retire at 40 with $1.5 million and you plan to end with $600,000 left, a floor sized against what late-stage care actually costs rather than a round number that just feels responsible. You are not trying to die with $1.5 million still in the account. You are planning to use it. That changes your math. Your annual budget goes up. Your required starting balance goes down. And the years you have to spend accumulating that balance go down too.
Let’s do the math in real terms, meaning after inflation, with spending that keeps its buying power the whole way. That is the only version of this comparison worth trusting. A 40-year-old with $1.5 million who plans to draw it down to $600,000 over 45 years at a 4% real return can pull about $64,843 a year. Someone preserving that same $1.5 million forever pulls about $57,692. Flip it around and it gets clearer. If you need $60,000 a year and you are willing to draw down to a $600,000 floor, you need about $1,395,650 instead of $1,560,000. That is $164,350 less, or a bit over two years of accumulation if you are adding $75,000 a year.
Two years, from a decision you almost certainly never made on purpose.
This is the smallest of the three dials, and it shrinks further the earlier you retire, because over a 50 year horizon compounding is already doing most of the work. Turn it anyway, and not just for the two years. Turn it because it is the dial that decides what the money is actually for.
Preserving your principal is a choice, not a default setting, and I lay out how to actually think about where to set that number in should you spend down your principal in retirement. Your kids will learn how to make money. Your legacy does not depend on handing them a seven-figure account. What it depends on is you being present, healthy, and free during the years when that actually matters. Spend the money. That is what it is for.
What You Should Actually Use Instead
Stop using 4% as your multiplier and start using 5% or 5.5% for your planning number.
Before anyone clutches their pearls, that is not reckless. That is grounded in the actual research. Bengen himself says 5.25% to 5.5% is reasonable for most retirees today. Guyton-Klinger puts the flexible starting rate at 5.2% to 5.6%. And those numbers assume zero additional income, no spending flexibility beyond the guardrails, and some of the worst market conditions in American financial history.
You are planning for flexible spending. You will likely earn something in your early retirement years. You are investing aggressively during accumulation with a stock-heavy portfolio.
Now, the fair counterargument. Plenty of smart people say the opposite, that you should withdraw less, not more. Morningstar has floated 3.7% as a starting rate. Schwab models future returns below the historical average. And they have a real point, because valuations today are high. The market’s cyclically adjusted PE sat around 38 in late 2025, close to the dot-com peak, and Bengen’s own updated model lowers the safe rate when valuations and inflation are both high. So why do I still say plan at 5% or 5.5%? Three reasons. Bengen, looking at those same high valuations, still lands at 5.25% to 5.5% for today’s retiree unless inflation roars back. The 2000 and 2007 retirees, who started into expensive markets, have already cleared the dangerous first decade without breaking his 4.7% floor. And none of my case needs the market to cooperate. Flexibility, a little earned income, and spending down your principal do the work, and all three hold even if returns disappoint.
Use 5% for conservative planning. Use 5.5% for your best-case scenario. Keep about three years of spending in a cash buffer so you never have to sell stocks in a down market early in retirement, and size it against the account you will actually draw from rather than your whole portfolio. Build in the simple guardrails. Cut spending modestly in a rough year, give yourself a raise in a strong one.
Go back and recalculate your actual number. Using 5% instead of 4% on that same $80,000 annual budget takes your target from $2,000,000 down to $1,600,000. You might already be there. You might be a year or two away instead of five. And if that is true, every day you spend at a job you do not want to be at, working toward a number that was always too high, is a day you handed over for no reason.
What an $80,000 budget actually requires
| Planning rate | Source | Portfolio you need |
|---|---|---|
| 4.0% rigid rule | Bengen 1994, Trinity 1998 | $2,000,000 |
| 4.7% updated worst case | Bengen 2025 | $1,702,000 |
| 5.25% today’s rate | Bengen 2025 | $1,524,000 |
| 5.5% with guardrails | Guyton-Klinger 2006 | $1,455,000 |
Every figure is $80,000 divided by the rate. Each rate is a research-backed number, not a guess. Spending down your principal lowers these further, as the section above shows.
The Bottom Line
The 4% rule is not worthless. It is just wrong for you. It was built on a worst case pulled from market data going back to 1926, designed for a 65-year-old with a moderate 60/40 portfolio trying to survive a 30-year window. It was never calibrated for someone in their 30s with decades of compounding ahead.
But there are three things you can do, each one independently, that pull your retirement date closer.
Flex your spending with guardrails instead of a rigid 4%, and on an $80,000 annual budget your required portfolio drops from $2,000,000 to about $1,455,000. Plan to spend down your principal instead of preserving it forever, and your required starting balance drops further still. Generate $25,000 to $30,000 a year in your first decade of retirement doing something you actually chose to do, and your portfolio barely has to move during the most dangerous stretch for sequence of returns risk.
Now imagine you use all three of these together.
There is no version of this math where using all three of these together does not cut your financial independence number and move your retirement date way earlier. None. The only question is whether you keep using a rule from 1994 that was never designed for you, or whether you actually run your numbers the right way.
If you want to grab the free guide, 10 Quiet Mistakes That Kill Your Early Retirement, and see where you actually stand, you can get it here. Takes about 10 minutes and will probably change what you think your timeline looks like. Send me the guide.
Frequently Asked Questions
Did the creator of the 4% rule really change his mind?
Yes. William Bengen, who published the original research in 1994, raised his own safe withdrawal rate to 4.7% in his 2025 book A Richer Retirement, after adding more asset classes to his model. He goes further for people retiring today, saying a rate between 5.25% and 5.5% is reasonable unless inflation spikes. So the 4% figure is a conservative floor, not the number he thinks most retirees should actually use.
What withdrawal rate should I use if I’m retiring at 40?
Plan around 5% for a conservative number and 5.5% if you are building in flexibility. A 45 or 50 year retirement is longer than the 30-year window the 4% rule was built for, so the smart move is not a lower fixed rate, it is a flexible one. Pair a 5 to 5.5% starting rate with spending guardrails and roughly three years of spending in cash, then run your own number rather than defaulting to 25 times spending.
What is the Guyton-Klinger guardrails rule?
It is a dynamic withdrawal method published by Jonathan Guyton and William Klinger in 2006. You start at a higher rate than 4%, then adjust each year. If your withdrawal rate climbs more than 20% above where it started, you cut spending 10% that year. If it falls more than 20% below, you give yourself a 10% raise. Those guardrails let the starting rate run as high as 5.2 to 5.6% for a stock-heavy portfolio.
Is a higher withdrawal rate safe with valuations this high?
It can be, but valuations are the real risk to watch. The market’s cyclically adjusted PE was near 38 in late 2025, close to its dot-com peak, and Bengen’s updated model does lower the safe rate when valuations and inflation are both high. The defenses that matter most are not return forecasts. They are spending flexibility, a little earned income early on, and a cash buffer. All of these protect you through a weak first decade no matter where the market goes.
I write about my own strategy and my own plan. The free guide linked above is genuinely free, and it puts you on my email list where I also sell The Early Retirement Blueprint. I am not compensated by any custodian, broker, or insurer mentioned here. This is educational content, not personalized tax or investment advice. Tax rules change and your situation is not mine, so confirm anything here against current IRS guidance or a professional before acting on it.
