The 4% Rule Is Now the 4.7% Rule. That Matters for Your Retirement.

For three decades, a single, simple number has sat at the center of almost every retirement plan: 4%.

The so-called "4% rule," dreamed up by financial planner Bill Bengen in 1994, told us that we could safely withdraw 4% of our savings in year one, adjust that dollar amount for inflation every year after, and have very little chance of running out of money over 30 years.

It was brilliant. It was memorable. And, for a generation, it was the answer to the terrifying question: Will I outlive my money?

Now, Bengen has something new to say. After 30 more years of research and a whole new book, he's officially torn up his old rule. The new number isn't 4%. It's 4.7%.

That might not sound like a huge shift. But on a $1 million nest egg, it's the difference between a $40,000 annual withdrawal and a $47,000 one. It's, as Bengen puts it, a 17.5% pay raise for retirees, overnight.

But before you start booking that extra vacation, you should know this: not everyone agrees. In fact, some of the smartest minds in finance think the number should be lower. This article will break down the new math, the ongoing debate, and, most importantly, what you should actually do.

The Rule That Built a Thousand Retirements (and Why It Needed a Tune-Up)

To understand why this change matters, it helps to know where the 4% rule came from in the first place.

Back in the 1990s, Bengen was a financial advisor with a room full of Baby Boomer clients asking the same question: "How much can I spend without going broke?" He couldn't find a satisfying answer in the academic literature, so he dove into the historical data himself.

He analyzed what would have happened to a retirement portfolio dating back to 1926, through the Great Depression, the 1973-1974 bear market, and the high-inflation 1970s. He found a "safe maximum" withdrawal rate, a SAFEMAX, that could survive even the worst period in modern financial history: a retirement starting on October 1, 1968.

That number was 4.15%, which he rounded down to 4%. The rule caught fire.

The problem? The world has changed. A lot. The original 4% rule was based on a simple portfolio of 50% U.S. large-cap stocks and 50% U.S. government bonds. Today, most investors hold a much broader mix of assets, small-cap stocks, international stocks, real estate, and more. Bengen's own advice evolved, too. He no longer puts people in just two asset classes.

So, he went back to the lab. He rebuilt his model using a more sophisticated, diversified portfolio. And the math delivered a new answer.

The New Math: From 4% to 4.7%, A 17.5% Raise

"The primary reason for the change is that my research has gotten more sophisticated," Bengen told USA TODAY.

His new model uses seven asset classes instead of just two: large-cap, mid-cap, small-cap, and micro-cap U.S. stocks, plus international stocks, bonds, and Treasury bills. He now assumes a slightly more growth-oriented mix of 55% stocks, 40% bonds, and 5% cash.

By introducing this broader diversification, the "safe" withdrawal rate jumped from 4.15% to 4.7%. In his book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, he calls 4.7% the new "worst-case scenario" for a 30-year retirement.

It's a critical distinction: 4.7% is the floor, not the ceiling. Bengen says that for today's retirees, in the current market environment, a rate of 5.25% or even 5.5% could be perfectly sustainable.

Show Me the Money: A Real-World Example

The beauty of this rule is its simplicity. Once you know your number, the mechanics are easy:

1. Year One: Withdraw 4.7% of your total retirement savings.
2. Every Year After: Take that initial dollar amount, ignore the percentage, and simply increase it by the rate of inflation to maintain your purchasing power.

Let's say you retire with a $1 million portfolio.

• In your first year, you'd withdraw $47,000.
• If inflation runs at 3% in year two, your withdrawal would increase to $48,410 ($47,000 x 1.03).
• If the market crashes and your portfolio drops to $850,000, you still withdraw $48,410 (or whatever the inflation-adjusted amount is). This is the counterintuitive part: the rule's power comes from trusting it during downturns.

To put the 4% vs. 4.7% difference in perspective:

That extra money isn't just a number, it's the difference between a modest retirement and one filled with family vacations, new hobbies, and less financial anxiety.

But Wait, Why Are Other Experts Saying 3.7%?

This is where the confusion sets in for most people.

If Bengen says 4.7% is safe, why is Morningstar, another highly respected research firm, publishing research suggesting a safe starting withdrawal rate is as low as 3.7%?

The answer lies in the fundamental difference between their methods:

• Bengen looks in the rearview mirror. His 4.7% SAFEMAX is based on historical returns going back almost 100 years. He asks: "What withdrawal rate would have survived even the worst period in U.S. history?" The answer is 4.7%.
• Morningstar looks through the windshield. Their 3.7% figure is a forward-looking projection based on today's high stock valuations and lower expected bond yields. They ask: "Given our models of future returns, what withdrawal rate has a 90% probability of success?" The answer is lower.

Essentially, Bengen says, "History tells us you can safely spend 4.7%." Morningstar warns, "The future might not be as generous as the past, so we're playing it safer at 3.7%."

Which one is right? Both have merit. The wise path is to understand the context. The 4.7% rule is a powerful, historically grounded guideline. It gives you permission to spend more confidently. But it shouldn't be followed blindly without acknowledging the current market's potential headwinds.

How to Make the 4.7% Rule Work for You (Practical Steps)

So, you're convinced this 4.7% business is worth a look. How do you translate this from a financial headline into a plan for your own life?

The "Good Enough" Portfolio for the 4.7% Rule

The 4.7% rule isn't magic. It depends on having a portfolio that looks at least somewhat like the one Bengen used in his research. This doesn't mean you need to be a stock-picking guru. It means embracing diversification.

Think of your portfolio as a garden, not a single crop field. If a late frost kills your tomatoes, you still have carrots, peppers, and lettuce.

Bengen's "seven-asset-class" model boils down to this: spread your money across different baskets. This includes a mix of large, mid-sized, and small U.S. companies, international stocks, high-quality bonds, and a bit of cash. For most people, this is easily achievable with a handful of low-cost index funds or a target-date retirement fund that does the rebalancing for you.

The specific 55/40/5 split is a guideline. The core principle is that moving beyond a simple two-asset portfolio into a well-diversified one is what earns you that extra 0.7% of safe spending power.

The Golden Rule Is Flexibility

Here's the uncomfortable truth behind both the 4% and 4.7% rules: they are rigid. They assume you mechanically increase your spending by inflation every year, no matter what.

Life isn't that neat. A better approach is to use the 4.7% rule as a starting point and a spending target, but to build in "guardrails." This is something even Morningstar's research supports: retirees who are willing to be flexible can often start with much higher withdrawal rates.

The guardrails approach works like this: in good market years, when your portfolio is up, you might take out your full 4.7% (or a bit more). In a year when the market plunges 20%, you might tighten your belt and withdraw only a lower floor amount. This simple, dynamic approach can drastically reduce your long-term risk.

Think of it like a thermostat. The 4.7% rule sets the ideal temperature. You, not the rule, adjust it slightly when the weather outside turns unexpectedly hot or cold.

Spend More, Fear Less (But Don't Set It and Forget It)

Bill Bengen didn't just update a number. He gave a gift of psychological freedom to a generation of savers. His core message is clear: You can probably spend more than you think.

The 4% rule was born from a worst-case scenario, the financial equivalent of planning your life around getting hit by a meteor. The updated 4.7% rule is a more realistic, data-driven acknowledgment that a well-diversified portfolio can work harder for you than we previously believed.

The extra 0.7% might not sound like much, but on a $1 million portfolio, that's an extra $7,000 a year, a significant annual travel fund or the ability to help a grandchild with tuition. It's a new lens through which to view your nest egg, not as a fragile nest you're terrified to disturb, but as a powerful engine that can support a rich, fulfilling life.

So, review your portfolio. Is it diversified beyond just stocks and bonds? If so, the 4.7% rule might be your new baseline. But pair it with wisdom: know that you may need to be flexible, be aware that forward-looking projections suggest caution, and remember that the greatest risk isn't running out of money, it's never giving yourself permission to enjoy the money you've worked so hard to save.