For decades, the 4% rule was the default answer to "how much can I withdraw from my retirement savings each year without running out of money." In 2026, that number is genuinely up for debate among the people who study it for a living. Morningstar's most recent research puts the safe withdrawal rate at just 3.9%. Bill Bengen, the financial planner who created the original 4% rule back in 1994, now says his own updated research supports withdrawing as much as 5.5%. Both are working from real data. They're just answering different questions, and the gap between their numbers is worth a lot more than a rounding error once you run it against an actual portfolio.
What the 4% Rule Actually Says
Bill Bengen introduced the 4% rule in 1994 using a portfolio split 50/50 between U.S. large-company stocks and intermediate-term government bonds. The rule itself is simple: withdraw 4% of your portfolio's value in your first year of retirement, then adjust that dollar amount for inflation every year after, regardless of what the market does. Bengen tested this against real historical market returns going back decades and found that a 4% starting withdrawal rate would have let a retiree's money last at least 30 years in every historical period he checked, including retirements that started right before major crashes. That's what "safe withdrawal rate" actually means: not a target for how much you should spend, but the highest rate that survives your worst-case starting point.
Why Morningstar and Bengen Landed in Different Places for 2026
Morningstar's December 2025 "State of Retirement Income" report puts the 2026 safe withdrawal rate at 3.9% for a retiree holding a fairly conservative 30% to 50% stock allocation, with a 90% probability the money lasts a full 30 years. That number climbs toward 5.7% if the retiree is willing to be flexible, spending less in bad market years and more in good ones instead of taking the same inflation-adjusted amount no matter what.
Bengen's August 2025 book, A Richer Retirement, revised his own number upward. He now argues for a 4.7% baseline, with room up to 5.25% to 5.5% for retirees using a more diversified portfolio. To get there, he expanded his original two-asset model to roughly 55% stocks spread across large-cap, small-cap, mid-cap, micro-cap, and international holdings, plus 40% intermediate Treasuries and 5% T-bills, then backtested that mix against nearly 400 real historical 30-year retirement periods.
The disagreement comes down to methodology, not opinion. Bengen looks backward: what has actually happened to real portfolios across a century of market history, and he wants a plan that would have survived every single one of those periods. Morningstar looks forward: what today's stock valuations and bond yields suggest future returns will be, using a lower 90% success bar instead of 100%. Neither approach is wrong. They're built to answer different versions of "how much risk am I willing to take."
What the Gap Is Actually Worth on Real Money
On a $1,000,000 portfolio, the difference between these numbers isn't abstract:
- Morningstar's 3.9%: $39,000 in year one
- The original 4% rule: $40,000 in year one
- Bengen's 2026 baseline of 4.7%: $47,000 in year one
- Bengen's upper estimate of 5.5%: $55,000 in year one
That's a $16,000 difference in year-one spending between the most conservative and most aggressive numbers on the table, on the same $1,000,000, and each year's withdrawal is set as a percentage of the number before it, then adjusted for inflation going forward, so the gap doesn't shrink over time. Which number applies to you depends heavily on your actual portfolio mix, which we'll get to, but it's not a difference you can afford to ignore when you're setting a real retirement budget.
Why Sequence of Returns Risk Matters More Than the Exact Percentage
Here's the part most coverage of this debate skips entirely: the specific percentage you pick matters less than most people assume, because when good and bad returns happen to hit your portfolio matters enormously. This is called sequence of returns risk, and it's the real threat to a retirement plan, more than whether you land on 3.9% or 4.7%.
To see why, run a simple side-by-side. Two hypothetical retirees each start retirement with $1,000,000 and withdraw a fixed $40,000 (4%) at the start of every year for 10 years. Both experience the exact same 10 annual returns, averaging 6% a year, just in the opposite order.
Retiree A gets the bad years first: -15%, -10%, 5%, 20%, 15%, 8%, 10%, 12%, 6%, 9%. After withdrawing $40,000 at the start of each year and applying that year's return to what's left, Retiree A ends year 10 with about $1,051,000.
Retiree B gets the identical returns in reverse: 9%, 6%, 12%, 10%, 8%, 15%, 20%, 5%, -10%, -15%. Running the same withdrawals against this order, Retiree B ends year 10 with about $1,234,000.
Same $400,000 withdrawn by both. Same 10 numbers, same 6% average return, same total market performance. The only difference is the order the returns arrived in, and it produced a roughly $183,000 gap in what each retiree has left. Retiree A's early losses forced withdrawals to come out of a shrinking balance at exactly the wrong moment, permanently locking in less money to benefit from the good years that came later. That mechanism, not the difference between 3.9% and 5.5%, is what actually wrecks otherwise well-planned retirements.
What This Actually Means for You
- Treat any withdrawal rate as a starting point, not a fixed rule. Both Morningstar and Bengen's own updated work point the same direction: retirees who can cut spending in a down year and loosen up in a good one can safely withdraw more than someone locked into the same dollar amount no matter what happens.
- Know which portfolio your number actually assumes. Bengen's higher numbers assume a more diversified, roughly 55% equity portfolio across multiple company sizes and countries. Morningstar's more conservative number assumes a 30% to 50% stock allocation. If your actual portfolio looks more like one than the other, the rate that applies to you follows your portfolio, not whichever expert you'd rather agree with.
- Build a buffer against the first few years, specifically. Keeping one to three years of planned expenses in cash or short-term bonds means a bad market in year one or two doesn't force you to sell stocks at a loss just to cover withdrawals. That's the practical defense against sequence of returns risk, and it matters more than the exact percentage you pick.
- Revisit the number as you age. A 30-year horizon is the standard assumption behind all of these figures. Someone retiring at 68 has a shorter horizon than someone retiring at 55, and a shorter horizon generally supports a higher safe withdrawal rate.
Retirement withdrawal math is only half the picture. If you're also working out when to start collecting benefits, our breakdown of Social Security at 62 vs. 67 vs. 70 covers the other major lever in your retirement income plan. And once you're pulling from tax-deferred accounts, our guide to RMD age rules covers the withdrawals the IRS eventually requires regardless of what withdrawal rate you'd planned on using.
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Spicy Investing