Safe Withdrawal Rate 2026: Why 3.9% is the New 4% (Calculator)
How much can you safely spend in retirement without running out of money? Here's everything you need to know about safe withdrawal rates.
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Key Takeaways (2026)
- • The safe withdrawal rate (SWR) is the percentage you can withdraw annually without running out of money
- • The classic 4% rule works for 30-year retirements, but early retirees need 3-3.5%
- • 2026 update: Morningstar now recommends 3.9%, up from 3.7% in 2024
What is a Safe Withdrawal Rate?
A safe withdrawal rate (SWR) is the percentage of your retirement portfolio you can spend each year with a high probability of not running out of money. It is the foundation of retirement planning.
For example, if your SWR is 4% and you have $1 million saved, you can spend $40,000 in your first year of retirement. The key question: will that money last 30, 40, or 50+ years?
The SWR answers this by looking at historical data: market returns, inflation, and various economic scenarios. A "safe" rate is one that would have survived the worst historical periods (like the Great Depression, 1970s stagflation, or 2008 financial crisis).
The 4% Rule Explained
The 4% rule is the most famous safe withdrawal rate. It comes from financial research in the 1990s and has become the standard benchmark for retirement planning.
THE 4% RULE
Withdraw 4% of your portfolio in year one. Adjust for inflation each year.
Example: $1M portfolio → $40,000 year 1 → $41,200 year 2 (at 3% inflation)
How it works in practice
Example: Retiring with $1,000,000
- Year 1: Withdraw 4% = $40,000
- Year 2: $40,000 + 3% inflation = $41,200
- Year 3: $41,200 + 3% inflation = $42,436
- Year 10: Approx. $52,200
- Year 20: Approx. $70,100
Notice that your withdrawal amount increases with inflation, but the percentage of your remaining portfolio may be higher or lower depending on market returns. In good years, your portfolio grows faster than withdrawals. In bad years, it may shrink.
The reverse: calculating your FIRE number
The 4% rule works both ways. To find how much you need to retire:
FIRE NUMBER FORMULA
Annual Expenses × 25 = FIRE Number
(Because 1 ÷ 0.04 = 25)
- Spend $40,000/year → Need $1,000,000
- Spend $60,000/year → Need $1,500,000
- Spend $80,000/year → Need $2,000,000
- Spend $100,000/year → Need $2,500,000
The Trinity Study
The 4% rule comes from the Trinity Study, a famous 1998 paper by three finance professors from Trinity University. They analyzed historical data from 1925-1995 to determine sustainable withdrawal rates.
Key findings
- A 4% withdrawal rate had a 95% success rate over 30 years
- A 50/50 stock/bond portfolio performed well
- Higher stock allocations (75/25) often ended with more money
- Withdrawals adjusted for inflation were sustainable
Important caveats
The Trinity Study has limitations that affect modern retirees:
- 30-year time horizon: Early retirees may need 40-50+ years
- Historical data: Future returns may differ from 1925-1995
- US-centric: Based on US stocks and bonds only
- No fees: Did not account for investment expenses
- 95% success ≠ 100%: There is still a 1-in-20 chance of failure
Safe Withdrawal Rate by Retirement Horizon
The 4% rule assumes a 30-year retirement. If you are retiring early (FIRE), you need a longer horizon and therefore a lower withdrawal rate. This table shows the recommended SWR based on how long your money needs to last.
| Retirement Duration | Retirement Age | Safe Withdrawal Rate | Portfolio Multiple |
|---|---|---|---|
| 20 years | Age 75+ | 5.0% | 20x expenses |
| 30 years | Age 65 | 4.0% | 25x expenses |
| 40 years | Age 50-55 | 3.5% | 28.6x expenses |
| 50 years | Age 40-45 | 3.25% | 30.8x expenses |
| 60+ years | Age 30-35 | 3.0% | 33.3x expenses |
⚠️ The FIRE Penalty
Retiring at 35 instead of 65 means your money needs to last twice as long. Research from Early Retirement Now shows that the "safe" rate drops from 4% to 3.25% for 60-year horizons. This means you need 33% more savings to retire early safely.
How to Calculate Your Safe Withdrawal Rate
There are two ways to use the SWR:
Method 1: Calculate your annual spending
If you have $1.5 million saved:
- At 4% SWR: $1,500,000 × 0.04 = $60,000/year
- At 3.5% SWR: $1,500,000 × 0.035 = $52,500/year
- At 3% SWR: $1,500,000 × 0.03 = $45,000/year
Method 2: Calculate how much you need
If you want to spend $50,000/year:
- At 4% SWR: $50,000 ÷ 0.04 = $1,250,000 needed
- At 3.5% SWR: $50,000 ÷ 0.035 = $1,428,571 needed
- At 3% SWR: $50,000 ÷ 0.03 = $1,666,667 needed
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Annual Spending
$40,000
$3,333/mo
Portfolio Multiple
25.0x
of annual spending
Success Rate
95%
30-yr horizon
Different Withdrawal Rates Compared
| Rate | Multiple | Best For | Notes |
|---|---|---|---|
| 3% | 33x | Very early retirees, ultra-conservative | Near 100% success rate, 50+ year horizons |
| 3.5% | 28.6x | Early retirees (40-50) | Good balance for 40-year retirements |
| 4% | 25x | Traditional retirement (60-65) | The classic rule for 30-year retirements |
| 4.5% | 22x | Later retirees with Social Security | More aggressive, needs other income |
| 5%+ | 20x or less | Short retirements, guaranteed income | Higher failure risk, not recommended alone |
Factors That Affect Your Safe Withdrawal Rate
1. Time horizon
The longer your retirement, the lower your SWR should be. A 30-year retirement (age 65-95) can handle 4%. A 50-year retirement (age 45-95) is safer at 3-3.5%.
2. Asset allocation
Higher stock allocations (60-80%) historically support higher withdrawal rates because of better long-term returns, despite short-term volatility. All-bond portfolios often fail at 4% due to lower returns and inflation erosion.
3. Flexibility
If you can reduce spending during market downturns, you can use a higher SWR. If your expenses are fixed (mortgage, healthcare), you need more cushion.
4. Other income sources
Social Security, pensions, rental income, or part-time work all reduce how much you need from your portfolio. This effectively allows a higher withdrawal rate from investments.
5. Sequence of returns risk
Bad market returns in your first few years of retirement hurt more than bad returns later. If you retire into a bear market, your portfolio may never recover even if markets eventually rebound.
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Monte Carlo SimulatorDynamic Withdrawal Strategies
The 4% rule is a static strategy—you set it and forget it. But dynamic strategies that adjust based on market conditions can allow higher initial withdrawals while maintaining safety. Here are the most effective approaches:
1. Guyton-Klinger Guardrails
The most popular dynamic strategy. You set "guardrails" that trigger spending adjustments:
Guyton-Klinger Rules:
- • Capital Preservation: If withdrawal rate rises 20% above target (market crash), cut spending by 10%
- • Prosperity Rule: If withdrawal rate falls 20% below target (market boom), increase spending by 10%
This allows starting at 5-5.5% because guardrails prevent depletion.
2. Variable Percentage Withdrawal (VPW)
Popular with the Bogleheads community. Instead of a fixed dollar amount, you withdraw a percentage based on your age and current portfolio value. The key insight: you can never run out of money because you are always taking a percentage of what remains.
The trade-off: income fluctuates with market performance. Good years mean more spending; bad years mean belt-tightening.
3. Fixed Percentage (Classic 4% Rule)
Withdraw 4% of your initial portfolio, adjusted for inflation each year. Simple and predictable, but does not adapt to market conditions. Best for those who want stable income and have conservative spending.
4. Bucket Strategy
Divide your portfolio into three buckets:
- Bucket 1 (Cash): 1-2 years of expenses in savings/money market
- Bucket 2 (Bonds): 5-7 years of expenses in bonds
- Bucket 3 (Stocks): Everything else in equities for growth
Draw from cash first, refill from bonds during normal years, only touch stocks during bull markets. This prevents selling stocks during downturns.
5. Floor-and-Ceiling
Set a minimum spending floor (essentials only) and maximum ceiling (full lifestyle). In good years, spend up to the ceiling. In bad years, drop to the floor. This protects essentials while allowing flexibility.
Safe Withdrawal Rate for Early Retirement (FIRE)
If you are pursuing FIRE (Financial Independence, Retire Early), the standard 4% rule may be too aggressive. Here is what to consider:
Recommended SWR by retirement age:
- Age 65+: 4% (30-year horizon)
- Age 55-64: 3.5-3.75% (35-40 year horizon)
- Age 45-54: 3.25-3.5% (40-50 year horizon)
- Age 35-44: 3-3.25% (50-60 year horizon)
Strategies for early retirees
- Use a more conservative rate. 3.5% instead of 4% adds significant safety for 40+ year retirements.
- Plan for flexibility. Be willing to reduce spending in bad markets or earn some income if needed.
- Consider partial FIRE. Barista FIRE or Coast FIRE reduce sequence risk by keeping some income.
- Account for Social Security later. You may withdraw more early, then reduce when Social Security kicks in at 62-70.
- Build a cash buffer. Having 2-3 years of expenses in cash prevents selling stocks during downturns.
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4% Rule Calculator2026 Safe Withdrawal Rate Outlook
What is a safe withdrawal rate right now? Market conditions matter. Here is what the latest research says for 2026:
2026 Research Updates:
- Morningstar (Dec 2025): Raised recommended SWR to 3.9%, up from 3.7% in 2024, citing better bond yields and reasonable stock valuations.
- Bill Bengen (2024): The father of the 4% rule now suggests 4.7%may be safe if your portfolio includes small-cap value stocks.
- Vanguard Capital Markets Model: Projects lower long-term returns than historical averages, suggesting 3.3-3.5% for conservative planning.
Current market factors to consider
- Higher bond yields: 4-5% Treasury yields improve portfolio income vs. 2020-2022
- Stock valuations: S&P 500 P/E ratios remain above historical averages
- Inflation: Returning toward 2-3% target after 2022-2023 spike
- CAPE ratio: Shiller P/E above 30 historically correlates with lower future returns
BOTTOM LINE FOR 2026
For traditional 30-year retirements: 3.9-4.0% is reasonable.
For early retirement (40-50+ years): 3.0-3.5% remains prudent.
Frequently Asked Questions
What is a safe withdrawal rate?
A safe withdrawal rate (SWR) is the estimated percentage of your retirement portfolio that you can withdraw annually, adjusted for inflation, without running out of money over a specific time horizon. The most commonly cited SWR is 4%, based on the Trinity Study, which has a 95% historical success rate over 30 years.
Is the 4% rule still valid in 2026?
Yes, but with caveats. Morningstar research (Dec 2025) suggests 3.9% is appropriate for 2026, up from 3.7% in 2024 due to higher bond yields. Bill Bengen, who created the 4% rule, now suggests 4.7% may be safe with small-cap value exposure. For early retirees with 40-50+ year horizons, 3-3.5% remains safer.
What is a safe withdrawal rate for a 40-year retirement?
For a 40-year retirement (retiring at age 50-55), research suggests a safe withdrawal rate of 3.25-3.5%. The standard 4% rule was designed for 30-year retirements. Longer horizons increase the chance of encountering severe market downturns, requiring more conservative planning.
How does the 4% rule work?
The 4% rule works by withdrawing 4% of your portfolio in year one of retirement, then adjusting that dollar amount for inflation each year. For example, with $1 million you would withdraw $40,000 in year one. If inflation is 3%, you would withdraw $41,200 in year two, regardless of portfolio performance.
What is the safest withdrawal rate?
The safest withdrawal rate is around 3%, which has nearly a 100% historical success rate even over 60-year periods. However, this requires saving 33x your annual expenses. Most experts recommend 3-3.5% for early retirees and 3.5-4% for traditional retirements starting at age 65.
Does the safe withdrawal rate include taxes?
No, traditional SWR calculations assume pre-tax withdrawals. If withdrawing from tax-deferred accounts (Traditional IRA, 401k), you need to account for income taxes. A 4% withdrawal might only provide 3-3.2% in actual spending power after federal and state taxes.
What is sequence of returns risk?
Sequence of returns risk is the danger that poor investment returns early in retirement can permanently deplete your portfolio, even if long-term average returns are good. A 30% market drop in year one of retirement is far more damaging than the same drop in year 20. This is why the first 5-10 years of retirement are critical for portfolio survival.
What is the Guyton-Klinger guardrails method?
Guyton-Klinger guardrails is a dynamic withdrawal strategy that adjusts spending based on portfolio performance. If your withdrawal rate rises 20% above target (market crash), you cut spending by 10%. If it falls 20% below target (market boom), you increase spending by 10%. This allows starting with a higher initial rate (5-5.5%) while protecting against depletion.
Sources & References
This article draws on peer-reviewed financial research and government data to ensure accuracy.
The original Trinity Study establishing the 4% withdrawal rate guideline.
Original research establishing safe withdrawal rates for retirement.
Annual analysis of safe withdrawal rates based on current market conditions.
Comprehensive 50+ part analysis of safe withdrawal rates and retirement strategies.
Research on dynamic withdrawal strategies using decision rules.
Comprehensive historical data on S&P 500 returns.
Official U.S. inflation data and historical CPI figures.
We rely on peer-reviewed research, government data, and established financial institutions. See our methodology for more details.