In the last column, we looked at three recently published financial books, including one I had really looked forward to reading: William Bengen’s A Richer Retirement. It’s the American certified financial planner’s long-awaited follow-up to his ground-breaking book on the so-called 4% Rule.
I had originally planned to focus exclusively on that book but ended up on a related project on my own site, which involved asking more than a dozen financial advisors on both sides of the border what they think of the 4% Rule and the tweaks Bengen covers in his follow-up book. The survey was conducted via LinkedIn and Featured.com, which has long supplied content for my site. You can see the complete set of responses on my blog, but at over 5,000 words, it’s a tad long for the space normally assigned to this Retired Money column.
Here, I focus on the most insightful comments and add a few thoughts of my own. Let’s jump right in.
Trusts and estates expert Andrew Izrailo, Senior Corporate and Fiduciary Manager for Astra Trust, recaps the basic thrust of the original 4% Rule:
“The 4% Rule, created by CFP Bill Bengen in the 1990s, remains one of the most referenced retirement withdrawal guidelines. It suggests withdrawing 4% of your portfolio in the first year of retirement and adjusting that amount for inflation each year. The idea was to provide a sustainable income stream for at least 30 years without depleting your savings.”
Bengen’s new book “revisits this concept using updated data and broader asset allocations,” summarizes Izrailo, “He now argues the safe withdrawal rate could rise to around 4.7%, supported by stronger market performance and portfolio diversification beyond the original stock-bond mix.”
4% is just a starting point
Like many of the other retirement experts polled, Izraelo sees the 4% Rule as “a reliable starting point, but not a fixed rule.” The 4% guideline “offers structure for retirees who need clarity on how much to withdraw each year, but real-world conditions require flexibility.”
For American investors, Izrailo still begins with 4% as a baseline because “it remains simple and conservative. Then I evaluate three major factors before adjusting: market volatility, portfolio performance, and expected longevity.” For Canadian retirees, “I tend to start lower, around 3.5%, due to differences in taxation, mandatory RRIF withdrawal rules, and the impact of currency and inflation differences compared to U.S. portfolios.”
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Toronto-based wealth advisor Matthew Ardrey of TriDelta Financial was not part of the Featured roundup but agreed with the general view that while a helpful starting point, the 4% Rule is only a guideline. “When I meet with a client, I don’t rely on the 4% rule at all,” said Ardrey, who has worked with clients for more than 25 years. “I’ve learned that rules of thumb—like the 4% rule—pale in comparison to the clarity and confidence that come from a well-crafted” and personalized financial plan. Such a plan should reflect each person’s unique circumstances, priorities, and goals, allowing them to build the right decumulation strategy for their situation.
“I would never want a broad guideline to stand in the way of someone taking their dream retirement vacation or helping their children purchase their first home,” he says. “Instead, I focus on creating a detailed plan that shows exactly how those goals can be achieved. And of course, life isn’t linear. A strong plan is something we can revisit and adjust as life changes, providing updated guidance to help keep retirement on track.”
After reading A Richer Retirement, tour operator Nassira Sennoune says Bengen succeeds in transforming “what was once seen as a strict withdrawal formula into a flexible approach that prioritizes experience, adaptability, and peace of mind … Bengen’s message is that Retirement should not revolve around fear or limitation. Instead, it should be about living fully within realistic financial boundaries. By adjusting withdrawals according to personal goals, market performance, and the natural flow of retirement years, retirees can enjoy their savings as a source of freedom rather than anxiety.”
Almost all the experts caution against taking a one-size-fits-all approach to the 4% Rule or its variants. Financial advisor and educator Winnie Sun, Executive Producer of ModernMom, has over 20 years working with clients. She starts with 4% as the baseline, then adjusts it based on actual client spending patterns and market conditions. “I had a couple last year who were terrified to spend more than their calculated 4%—even though their portfolio had grown 30%—and they were skipping vacations they’d dreamed about for decades. We bumped them to 5.5% for two years because the math worked and life is short: they finally took that trip to Italy. The biggest mistake I see isn’t about the percentage itself, it’s that people forget about tax efficiency in withdrawal sequencing.”
Oakville, Ontario-based insurance broker James Inwood says the 4% rule is “a decent guideline, but it’s not some magic number you can set and forget. I’ve watched people get into trouble because they didn’t account for medical bills, which are a real wild card here in Canada,” he shares. “I always tell people to build in a cash buffer and check in on that withdrawal rate every couple of years instead of just locking it in permanently.”
Broader asset allocation
Bengen is now recommending a broader asset diversification to add in small percentages of international equities and small-cap stocks in addition to his historic investment portfolio of 50% U.S. large-cap stocks and 50% intermediate bonds, says attorney Lisa Cummings. “He claims with this broader diversification the safe withdrawal rate could now be up to 4.7% under the best-case scenario, 4.15% worst case.”
Today’s retirees have to deal with both rising inflation and longer lifespans, she adds, so she advises clients to have a two-year cash cushion in case of prolonged negative markets, and otherwise maintain a flexible annual withdrawal range ranging between 3.5 and 4.5%.
David Fritch, a CPA with 40 years of experience serving small business owners, stopped treating the 4% Rule as gospel once he noticed their retirement income rarely came from just traditional investment portfolios. “Most had business sale proceeds, real estate holdings, and irregular cash flows that made the 4% rule almost irrelevant.”
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He also realized the sequence of withdrawals and which vehicles created the withdrawals were more important than mere annual percentages. “Forget the percentage and work backward from your actual monthly expenses, then layer in guaranteed income sources (Social Security, pensions, annuities) before touching portfolio money. Most of my retired clients ended up withdrawing 2–3% because they structured things right on the front end.”
Late-career income fluctuations can change calculations
Digital marketer Fred Z. Poritsky says late-career income career changes can radically affect retirement withdrawal math. The 4% rule assumes you’re done earning but “if you’re keeping one foot in the working world (consulting, part-time, passion projects that earn), you can probably push 5–6% in those active years since you’re adding income streams.”
Executive recruiter Mohammad Haqqani found “the most common point of failure” in applying the 4% rule isn’t in the math “but in the assumptions about human behaviour … The rule’s primary oversight is that it models a financial reality, not a lived one,” he says. “It presumes a relatively smooth, inflation-adjusted spending pattern for 30-plus years. Yet, real life rarely follows such a linear path. Most people experience distinct phases of retirement spending: the active, travel-heavy ‘go-go’ years; the quieter, home-centric ‘slow -go’ years; and finally, the ‘no-go’ years, where health-related costs can rise sharply … Perhaps the most important variable isn’t the percentage we withdraw, but the self-awareness to know when we’ll truly want to spend it.”
Wealth manager Alajahwon Ridgeway concludes “the 4% Rule is great but I think it is over-simplified just like many retirement planning topics.” And it doesn’t account for the so-called “sequence of returns … When you take distributions is just as important as how much. In a down market, taking out 4% may cause additional negative impact to a portfolio, making it hard to capture returns in the subsequent years,” he explains. “The 4% Rule should be re-evaluated at least annually to determine the correct amount to be distributed in any given year. I use the 4% Rule to answer the age-old question, ‘Do I have enough to retire?’”
My own take on the rule
After absorbing all this input, what have I concluded myself? I’ve not really changed the observations on the Rule that I made in the previous MoneySense column on this topic. 4% is a nice round number and starting point that ensures you don’t grossly underestimate how much you need to save.
If you’re obsessed with living too long in a world of future hyperinflation, by all means whack it down to 3% or less. If you have a generous inflation-indexed defined benefit (DB) pension plan, you’re probably not reading this anyway, or are not greatly fussed about the 4% guideline
If you’re like the Retirement Club members who lack DB pensions and are essentially your own DIY pension manager, you probably need to start your projections with some version of the 4% Rule, as explained in Bengen’s follow-up book. If you choose in whole or in part to pensionize your nest egg with annuities or similar vehicles, then the product providers will decide the exact annual withdrawal amount.
The 4% Rule also works in the other direction. If you’re like me and a bit pessimistic about future markets and make the kind of tweaks to your situation recommended by Bengen’s new book, you may be pleasantly surprised that you get nudged into considering living it up a little and withdrawing 5 or 6% a year in your go-go years—at least as long as the economy and markets remain sunny.
As they say, a journey of a thousand miles begins with a single step, and the 4% Rule remains an excellent first step.
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