For 30 years, "save 25 times your annual expenses and withdraw 4% a year" was the closest thing personal finance had to a settled answer. In 2026, that consensus has split. Morningstar's latest research puts the safe withdrawal rate at just 3.9%, while Bill Bengen — the analyst who invented the 4% rule back in 1994 — now says retirees can safely start as high as 4.7%. That gap sounds small until you put real money behind it: on a $1 million portfolio, it's the difference between $39,000 and $47,000 of spending a year. This guide breaks down where the 4% rule came from, why the experts disagree in 2026, and exactly how to calculate your own number.
Where the 4% Rule Came From
Financial planner Bill Bengen introduced the rule in a 1994 paper. He tested historical U.S. stock and bond returns going back to 1926 and found that a retiree who withdrew 4% of their portfolio in year one, then adjusted that dollar amount for inflation every year after, never ran out of money over any 30-year period in U.S. history — even someone unlucky enough to retire right before a major crash.
The math behind the "25x" shortcut is simple: if 4% of your portfolio covers one year of expenses, then your full portfolio needs to be 25 times your annual spending (since 1 ÷ 0.04 = 25).
Why 2026 Broke the Consensus
Two of the most-cited names in retirement research looked at the same question this year and landed in different places:
| Source | 2026 Safe Withdrawal Rate | On a $1M Portfolio |
|---|---|---|
| Morningstar (fixed spending) | 3.9% | $39,000/year |
| Morningstar (flexible "guardrails") | Up to 5.7% | Up to $57,000/year |
| Bill Bengen (worst-case floor, 2025 revision) | 4.7% | $47,000/year |
| Bill Bengen (flexible strategy) | 5.25%–5.5% | $52,500–$55,000/year |
Morningstar's 3.9% figure comes from its December 2025 "State of Retirement Income" report. It's up slightly from 3.7% in 2025, thanks to improved return assumptions, and applies to a retiree with a 30-year horizon holding a relatively conservative 30–50% in stocks, with the rest in bonds and cash. It's a forward-looking estimate built on projected future returns — not a look backward at history.
Bengen's 4.7% figure, published in his 2025 book A Richer Retirement, comes from expanding his original test portfolio to include small-cap stocks and international equities, which historically improved diversification and returns. He describes 4.7% as a worst-case floor, not an average — meaning most retirees in most years could safely spend more.
Step-by-Step: Calculate Your Own Retirement Number
Step 1 — Estimate Your Annual Retirement Spending
Start with your current annual spending and adjust for retirement — you may spend less on commuting and work clothes, but more on healthcare and travel. Many retirees land close to 70–80% of their pre-retirement income.
Step 2 — Subtract Guaranteed Income
Social Security and any pension income reduce how much your portfolio needs to cover. The 2026 Social Security cost-of-living adjustment (COLA) is 2.8%, bringing the average retired worker's monthly benefit to roughly $2,071, or about $24,850/year.
Step 3 — Apply a Withdrawal Rate to Find Your Target
Divide your portfolio-funded spending gap by your chosen withdrawal rate to find your target portfolio size:
| Annual Portfolio Need | At 3.9% (Morningstar) | At 4% (Classic Rule) | At 4.7% (Bengen) |
|---|---|---|---|
| $30,000 | $769,000 | $750,000 | $638,000 |
| $40,000 | $1,026,000 | $1,000,000 | $851,000 |
| $50,000 | $1,282,000 | $1,250,000 | $1,064,000 |
| $60,000 | $1,538,000 | $1,500,000 | $1,277,000 |
| $80,000 | $2,051,000 | $2,000,000 | $1,702,000 |
Figures rounded to the nearest thousand; calculated as annual need ÷ withdrawal rate.
Why the Withdrawal Rate Debate Matters More in 2026
A few real economic shifts explain why 2026 estimates moved:
- Inflation has cooled but isn't back to target: The 12-month inflation rate was 3.5% as of June 2026, down from 4.2% the month before, while core inflation (excluding food and energy) sat at 2.6% — still above the Federal Reserve's 2% goal.
- Bond yields improved: Higher yields on bonds and cash versus a few years ago is part of why Morningstar raised its estimate from 3.7% to 3.9% for 2026.
- Sequence-of-returns risk is front and center: Morningstar's research found that portfolios holding 30–50% in stocks — not more — tend to support the highest safe withdrawal rates, because a market downturn in your first few retirement years does outsized damage to a heavily stock-weighted portfolio.
Fixed vs. Flexible Withdrawal Strategies
The biggest lever in the 2026 research isn't which expert you follow — it's whether your spending is fixed or flexible:
- Fixed (set-it-and-forget-it): Withdraw the same inflation-adjusted dollar amount every year regardless of markets. This is the safest, most conservative approach, and it's what produces Morningstar's 3.9% baseline.
- Flexible ("guardrails"): Adjust spending up in good years and trim it in down years. Morningstar found this can support a starting withdrawal rate as high as 5.7%, because you're not locking in a single number that has to survive every possible market scenario.
Delaying Social Security is another lever worth considering: relying on portfolio withdrawals or part-time work in your early retirement years so you can claim Social Security later generally increases lifetime guaranteed income and reduces pressure on your portfolio.
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Calculate My Retirement Number →How Much Do You Actually Need? A Realistic Range
Given the 2026 data, most retirees are better served picking a range rather than a single magic number:
- Conservative planners (early retirees, long horizons, no pension): lean toward Morningstar's 3.9%, or even lower, and favor a 30–50% stock allocation to reduce sequence-of-returns risk.
- Traditional retirees (retiring around 65, 30-year horizon): the classic 4% rule remains a reasonable, easy-to-communicate starting point.
- Flexible spenders comfortable adjusting in down years: Bengen's 4.7% floor, or Morningstar's guardrails approach up to 5.7%, can support meaningfully more spending — and more Social Security-delay flexibility — without materially increasing the risk of running out of money.
Key Takeaways
- The classic 4% rule still works as a rough, easy starting estimate: multiply annual expenses by 25
- Morningstar's 2026 baseline is 3.9% for fixed spending on a balanced (30–50% stock) portfolio — up from 3.7% in 2025
- Bill Bengen's revised floor is 4.7%, with flexible strategies supporting up to 5.5%
- Flexible "guardrails" spending — adjusting up or down with the market — can safely support a higher starting rate than a fixed withdrawal
- The 2026 Social Security COLA is 2.8%, pushing the average retiree benefit to roughly $2,071/month — factor this into your portfolio's spending gap before applying any withdrawal rate
- Your personal safe rate depends on your portfolio mix, time horizon, guaranteed income, and flexibility — not just which expert you read last
Data referenced: Morningstar "State of Retirement Income" report (December 2025); Bill Bengen, A Richer Retirement (2025); U.S. Social Security Administration 2026 COLA announcement (October 2025); U.S. Bureau of Labor Statistics CPI data (June 2026, released July 14, 2026).
This article is for informational purposes only and does not constitute financial or retirement advice. Withdrawal rate research changes as market conditions evolve. Always consult a licensed financial advisor to build a retirement plan suited to your specific situation.