Is the 4% Rule Still Valid in 2026?

The 4% rule is the most repeated number in personal finance — and, depending on who you ask, either a durable planning heuristic or a liability waiting to materialize. The honest version: the rule still works for the situation it was designed for, has been updated since 1994 in ways that matter, and is the wrong tool for a significant share of the people using it.

Where the rule came from

Bill Bengen published the original research in 1994. He tested how much a retiree could withdraw in the first year of retirement — adjusted annually for inflation — without running out of money in any 30-year historical period. Using a portfolio of large-cap US stocks and intermediate-term bonds, he landed on 4.1%. Round down for safety and you have the rule.

The Trinity Study (1998, updated most recently with data through 2023) stress-tested the same question across all rolling historical periods and added portfolio-allocation analysis. Its headline finding: a 4% inflation-adjusted withdrawal succeeded in 95–98% of all historical 30-year periods, depending on stock allocation. The best-performing allocation was 75% stocks / 25% bonds, which hit 98% success.

Bengen himself revisited the work in 2025 and raised his own number. By diversifying beyond large-cap US stocks — adding mid-cap, small-cap, micro-cap, and international equities to the original portfolio — he reached a floor of 4.7%. The logic is sound: broader diversification across return streams produces a smoother ride, and the original 4% was calibrated for a less diversified starting point. Whether you want to rely on that extra 0.7 percentage points is a judgment call about whether you'll actually maintain that five-factor portfolio through a downturn.

What Morningstar says for 2026

Morningstar runs forward-looking models each year using current capital-markets assumptions, not just historical data. Their 2026 figure: 3.9% for a retiree using a 30-year horizon with a portfolio of 30–50% equities.

That's up from 3.7% in 2024 and 2025, driven by improved return expectations for bonds after the rate normalization of the past few years. The historical progression shows how much the bond environment matters:

Year	Morningstar safe rate
2021	3.3%
2022	3.8%
2023	4.0%
2024	3.7%
2025	3.7%
2026	3.9%

The 2021 figure was depressed because near-zero bond yields stripped the defensive half of the portfolio of its return contribution. Every dollar in bonds earned almost nothing, forcing the whole burden of longevity onto equities. Normalized yields have brought the number back close to 4%.

Two things to understand about the 3.9% figure. First, Morningstar targets a 90% success rate — roughly one historical cohort in ten would have run short. That's a planning estimate, not a guarantee. Second, retirees who adopt a flexible or guardrails strategy — trimming spending if the portfolio drops significantly, spending modestly more in strong years — can start as high as 5.7% per Morningstar's research. The flexibility does most of the heavy lifting; a rigid "4% forever and don't look again" approach is the version that struggles.

The valuation problem

The honest challenge to the rule comes from starting valuations. The Shiller CAPE ratio sits above 30 in mid-2026 — historically elevated territory. Research from Vanguard, Research Affiliates, and others consistently shows that high starting valuations predict lower returns over the subsequent decade. If US stocks deliver 4–5% real returns over the next ten years rather than the historical ~7%, failure rates at 4% withdrawal rise meaningfully.

This doesn't mean the rule is broken. It means its historical success rate was earned in conditions that may not recur. A retiree who builds in flexibility, keeps 1–2 years of spending in cash or short bonds, and doesn't need exactly 4% to cover fixed costs is substantially better positioned than one who does.

Where 4% clearly breaks down: early retirement

The rule was designed for 30-year retirements. Retire at 45, and you might need the portfolio to last 50 years. Every study agrees: the success rate at 4% over 50 years is materially lower than over 30. The additional sequence-of-returns exposure — more years for a bad early run to compound damage — erodes the historical safety margin.

The numbers vary by study and assumptions, but a workable planning range for longer horizons:

Retirement horizon	Approximate safe rate
30 years (retire ~65)	3.9–4.0%
35 years (retire ~60)	3.5–3.75%
40 years (retire ~55)	3.25–3.5%
50 years (retire ~45)	3.0–3.25%

These are approximations, not guarantees. The gap matters in practice: a $2M portfolio at 3.25% generates $65,000/year. At 4%, it generates $80,000/year. That $15,000 difference shapes how much you need to accumulate before retiring, not just how you draw down after.

A hypothetical couple — call them Dana and Marcus, both 52, planning to retire at 55 — should be sizing their portfolio to a 3.25–3.5% withdrawal, not 4%. If they're targeting $90,000/year in portfolio income, the honest number needed is $2.6–2.75M, not the $2.25M a naive 4% calculation suggests. That's a $400,000 gap worth knowing about before the resignation letter is written.

Sequence risk: why the order of returns matters more than the average

Why does the safe rate fall for longer horizons? Sequence-of-returns risk is the mechanism. A retiree who withdraws a fixed amount and encounters a major market decline in years two through four is forced to sell more shares at depressed prices. Even if long-run average returns look fine in hindsight, the portfolio never fully recovers — the early damage is permanent.

The empirical fix is simple but emotionally difficult: hold 12–24 months of spending in cash or short-term bonds at the start of retirement. You draw from that buffer in down markets, leaving equities time to recover without being liquidated at a loss. The drag from holding some cash is real but modest; the protection against a bad early sequence is worth considerably more.

The other lever that most retirees underestimate: Social Security timing. Delaying from 62 to 70 raises the monthly benefit by roughly 76% (8% per year from full retirement age to 70, plus the foregone reduction for claiming early). For a retiree whose portfolio withdrawal covers the gap between retirement and claiming, every year of delay reduces the long-run draw on the portfolio. In present-value terms, delaying Social Security is often the highest-expected-return decision a 60-year-old can make.

To see how different withdrawal rates interact with your numbers — savings, Social Security income, expected spending, age — Granary's when-can-I-retire calculator models the full picture. If you want to stress-test a specific portfolio balance, the how long will $1 million last page runs depletion curves at different withdrawal rates and return scenarios.

The bottom line

The 4% rule is not dead. For a 30-year retirement with a balanced portfolio, the historical evidence — including the 2023 Trinity update — still supports it, and Morningstar's forward-looking 3.9% puts current conditions close to parity with 4%. Bengen's more diversified update pushes the defensible rate to 4.7%, though only for the specific multi-asset allocation he tested.

For early retirees, 4% is optimistic and the research is clear: longer horizons require lower rates. For anyone who can't reduce spending in a downturn, elevated starting valuations add meaningful risk to the traditional number. For someone with spending flexibility, Social Security covering a real share of expenses, and an actual diversified portfolio, something in the 3.75–4% range remains reasonable — not a guarantee, but a defensible starting point.

The harder question isn't whether 4% is the right number. It's whether your specific plan survives the first decade of retirement, which is when sequence risk is highest and flexibility matters most. Granary stress-tests exactly that: your actual accounts, tax situation, Social Security timing, and Monte Carlo uncertainty — not a one-line rule applied to a spreadsheet.

This is planning education, not tax or investment advice.