The 4% rule and safe withdrawal rates: what the research says in 2026
Almost every FIRE calculation leans on a withdrawal rate, and the most famous is 4%. It turns a spending figure into a FIRE number (multiply by 25) and gives retirees a simple starting point for how much to take each year. But the 4% rule is a research finding with specific assumptions, not a law of nature. This guide explains where it came from, how current research has updated it, and how to think about it if you plan to retire early.
What the 4% rule actually says
In its classic form the rule says: in your first year of retirement, withdraw 4% of your portfolio. In each later year, withdraw the same dollar amount adjusted for inflation, regardless of how the portfolio has performed. Historically, for a balanced U.S. stock-and-bond portfolio, that approach would have lasted at least 30 years in the periods studied.
Three details are often lost when the rule is repeated:
- The 4% applies to the starting balance. After year one, withdrawals follow inflation, not the portfolio’s value.
- The horizon was 30 years. Early retirees may need 40 or 50.
- “Worked” means the money did not run out in the historical periods tested. Many periods would have left large surpluses; a few came close to failing.
Where it came from
Morningstar’s overview of its research credits financial planner William Bengen, who developed the rule of thumb in 1994 using historical market returns. His question was simple: what is the highest starting withdrawal, raised with inflation each year, that would have survived the worst historical sequence of returns over 30 years? The answer was close to 4%. Later work, including the widely cited “Trinity study” from three professors at Trinity University, tested various portfolios and horizons and helped turn the figure into a household rule.
Morningstar’s updated estimates
Since 2021 Morningstar has published an annual estimate of a safe starting withdrawal rate. Unlike Bengen, it uses forward-looking forecasts for stock and bond returns and inflation. Its base case assumes a balanced portfolio, fixed real withdrawals over 30 years and a 90% probability of success. On its research page Morningstar lists these results:
| Year | Estimated safe starting withdrawal rate |
|---|---|
| 2021 | 3.3% |
| 2022 | 3.8% |
| 2023 | 4.0% |
| 2024 | 3.7% |
| Latest estimate | 3.9% |
The movement reflects changing bond yields, equity valuations and inflation expectations. When bond yields are higher and expected inflation lower, safe rates rise; when valuations are stretched and yields low, they fall.
Flexible withdrawal strategies
The fixed-real approach is deliberately rigid: you never cut spending, even after a crash. Morningstar’s research also examines flexible methods — such as taking a constant percentage of the current balance, using guardrails that trim spending after bad years, or endowment-style formulas. In an interview about its 2026 research, Morningstar’s authors said such strategies could lift starting rates, with the constant-percentage and endowment methods reaching 5.7%, at the cost of more variable yearly income. Flexibility trades predictable paychecks for a higher average spend.
Sequence-of-returns risk
The biggest threat to a withdrawal plan is not a low average return but bad returns early. If the market falls 30% in your first two years while you keep withdrawing, you sell more shares at low prices and the portfolio may never recover enough. The same returns in reverse order — good years first — can leave you far better off. Our withdrawal calculator uses a constant return for clarity, which is why it is more optimistic than research that tests many paths.
Ways people manage sequence risk include holding some bonds or cash, keeping a year or two of spending in safe assets, reducing withdrawals after a poor year, retiring with a little part-time income (see Barista FIRE), or delaying Social Security to increase guaranteed income later.
What this means for early retirees
If you retire at 40, a 30-year study only gets you to 70. Most early retirees therefore use a lower starting rate, plan for flexibility, or both. Common choices in the FIRE community range from about 3.25% to 4%. A useful way to decide is to ask what you would do in a bad decade. If you could cut spending by 10–20% or earn some income, a higher starting rate may be tolerable. If your budget is already lean, a lower rate gives more margin.
Translating rates into FIRE numbers
| Withdrawal rate | Multiple of spending | FIRE number for $40,000 |
|---|---|---|
| 3.0% | 33.3× | $1,333,333 |
| 3.5% | 28.6× | $1,142,857 |
| 3.9% | 25.6× | $1,025,641 |
| 4.0% | 25× | $1,000,000 |
| 4.5% | 22.2× | $888,889 |
The FIRE number calculator builds this table for your own spending.
Taxes, fees and RMDs
Withdrawal-rate research usually works before taxes. If your withdrawals are taxable, the spendable amount is lower. Fund fees also reduce returns and so the safe rate. Later in life, required minimum distributions from tax-deferred accounts may force larger withdrawals than you need; you can reinvest the excess in a taxable account. IRS Publication 590-B explains RMD rules for IRAs.
A sensible way to use the 4% rule
- Use 4% (25×) as a first estimate of your FIRE number.
- Recalculate at 3.5% to see a conservative target.
- Decide in advance how you would respond to a bad market — cut spending, earn income, or both.
- Review your withdrawal rate each year rather than setting and forgetting.
Common misreadings of the rule
“I can withdraw 4% of whatever my balance is each year.” That is a different method — a constant-percentage rule — which never runs out but makes income swing with the market. The classic rule fixes the dollar amount after year one.
“4% means I will run out after 25 years.” Only if the portfolio earned nothing after inflation. With positive real returns the money lasts longer; with poor early returns it can last less.
“Research proves 4% is safe.” Research shows how a rule performed in tested historical or simulated periods. Future returns may differ, which is why the estimates move from year to year.
Summary
The 4% rule remains a useful anchor. Current research puts a fixed, inflation-adjusted starting rate for 30 years at around 3.9%, with more possible if you are flexible. Early retirees with longer horizons should plan more conservatively or build in flexibility. This guide is educational and is not investment advice.