On a random weekday earlier this month, a few hours of unexpected free time materialized on my calendar.
My eyes quickly darted to Bill Bengen’s new book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, (Amazon Affiliate link), which had been sitting on my desk since its arrival on August 5th.
I snatched it up and closed my office door, fearing some unknown pressing need would encroach upon this gift of time.
By afternoon’s end, the text was devoured. To make sure I correctly interpreted his words, I set up a Zoom meeting with Bill to have a one-on-one conversation. It felt like two kindred Vulcans discussing their quest to find a logical answer to something that cannot be answered with logic.
What is this mythical quest?
The perfect withdrawal plan.
In this post, I’ll share key concepts from the book and from my talk with Bill.
Today, I review Bill Bengen's latest book in my quest for the perfect retirement withdrawal plan. Share on X
But first, why was I so eagerly anticipating this book? Who is Bill Bengen, you may ask?
The Father of the 4% Rule
Bill is, unintentionally, the “father” of the 4% rule. It started with a research paper he published in 1994.
An MIT grad in Aeronautics and Astronautics, he worked in his family’s bottling and distribution business. After the company was sold in 1987, he shifted into financial planning.
When clients began asking how much they could safely withdraw in retirement, he discovered that finding answers proved more challenging than he imagined. Industry responses from financial colleagues were inconsistent and lacked supporting research.
His engineering mind went to work, seeking a mathematical solution to the problem.
He used historical data to test portfolio designs for SAFEMAX – the highest safe withdrawal rate for a given set of parameters. His initial analysis utilized a 50/50 portfolio of U.S. large-company stocks and intermediate-term government bonds, tested over a thirty-year time horizon.
The result?
A 4.15% SAFEMAX rate. The withdrawal rate at which, over the parameters he tested, no retiree would have run out of money. Bengen felt that the ‘.05’ decimal place implied greater precision than the research justified, so he rounded down to 4.1%. With media involvement, it became abbreviated, and the “4% rule” was born.
As Bengen himself says, it was never meant to be a law like one of Newton’s Laws of Motion — just a starting point.
What’s Changed Since 1994?
A simple two-asset class portfolio no longer reflects reality.
His latest model includes small-cap, micro-cap, international, and Treasury bills. With 55% stocks, 40% bonds, and 5% cash, his updated SAFEMAX rises to 4.7%.
But here’s the catch: that’s the worst-case retiree, the unlucky one who retired into the toughest market sequence.
His historical testing encompasses 349 retirees, each retiring one calendar quarter apart. And thus, the 4.7% rate applies to only one of the 349 – the one who experienced the worst timing of market conditions.
He emphasizes, if all retirees indiscriminately use the 4.7% SAFEMAX for their withdrawal plan, they would significantly underspend.
In fact, the average portfolio balance for all retirees (in his research) was more than five times its initial value, meaning that for most, the universally safe rate was too safe.
Valuation and Inflation
How much should recent stock market highs factor into your withdrawal rate?
Bengen’s latest book includes a section on the impact of stock valuations and inflation. Using CAPE ratios (Shiller Cyclically Adjusted Price-to-Earnings Ratio (Shiller CAPE, a measure of stock market valuation) and CPI (Consumer Price Index, a measure of inflation), he builds tables to guide starting withdrawal amounts.
(You can find these tables on his website under Charts and Tables, Chapter 2, tables 2.1 through 2.4.)
For example, if the Shiller CAPE is at 19 and the CPI is between 2.5% and 5%, that equates to a 6.95% SAFEMAX starting withdrawal rate.
If the Shiller CAPE were even higher, as it is today, would that materially lower the expected SAFEMAX for someone retiring today?
Maybe. The answer is complicated.
Bill told me that today (as of our Sept. 27, 2025, conversation), 5.5% would be his SAFEMAX, even with current market valuations.
However, he emphasized that it’s a fluid number. It can change. It’s not intended as a “set it and forget it” strategy.
He also acknowledged that as portfolio diversification expands beyond the large-cap asset class, results are not as highly correlated with metrics like the Shiller CAPE.
And he feels investors spend too much time worrying about the garden-variety bear markets when sustained high inflation is the bigger risk.
To hedge against sustained higher inflation, you must have enough equities in your portfolio to grow it sufficiently to maintain your spending power.
Perhaps that’s why his recommended allocation to equities continues to rise.
Today’s Allocation Debate
In one of Bill’s latest LinkedIn posts, he said,
“I recommend that the 55% allocation to stocks used frequently in my book be upgraded to 65% for all retirees with planning horizons of at least 20 years.”
What’s my thinking about that? Naturally, the answer is, “It depends.”
What does it depend on? Your individual financial circumstances and behavioral tendencies.
I say:
Know thyself, and thy ‘right-fit’ portfolio shall reveal itself unto you.
For example, if you are delaying Social Security and relying entirely on your portfolio for early spending needs — and you feel anxious about market risk — starting with a more conservative stance, perhaps 55% equities, may make more sense. If all goes well, your equity allocation can float up over time.
Bengen discusses this approach, called the “rising equity glidepath,” favorably in his book.
What the 4% Rule Misses
When it comes to taxes, percentage calculations are gross withdrawals. They do not represent spendable income. You’ll have to assess taxes and how much of that gross withdrawal is available to spend.
Taxes are one of several factors I cover in my free report, Four Things Near Retirees Must Know About the 4% Rule, where I discuss several items not covered in the traditional 4% rule approach.
The bottom line – while we all want certainty and a neat mathematical formula to follow, life doesn’t work that way. You need a fluid and dynamic process. Not a rule.
The Most Important Factor
Bill summed it up succinctly,
“Have a plan so you don’t run out.”
Not a rule. Not a percentage. Instead, a structured process.
The process itself is what matters most — deciding on your structure, monitoring, measuring, and adjusting consistently. The output of this process allows your withdrawals to adjust dynamically.
How often do you monitor and adjust?
Bill and I are in sync on this; annual reviews are sufficient. Measuring at random highs or lows may lead you off course.
My preference is updating plans annually based on year-end values. If your software or measuring process updates based on real-time values, you may get a warped view.
For example:
- If measuring near market peaks, it may lead you to withdraw too much.
- If reassessing near market bottoms, it may lead you to withdraw too little.
Managing Risk
Both Bill and I were practicing advisors during the Great Recession. We remember the fear.
In his words, “It’s hard to imagine something worse than that. I was plain scared”.
So was I.
It’s easy to forget that feeling in today’s high markets.
That’s why having a third party to help manage risk is so valuable — to temper overconfidence in bull markets and fear in bear markets.
Who do you turn to help remain objective about your decisions?
This applies to advisors, too. I am forever grateful for a team of colleagues, as we keep each other grounded in our thinking.
Like me, Bill favors remaining 100% equities during the accumulation phase, but advises adjusting to a more conservative position as retirement approaches.
When asked about the magnitude and timing of such adjustments, he said it depends on market conditions. And added that in today’s market, he’d lean toward a sharper reduction in equities for those nearing retirement.
Connecting Cash Flow to Allocation
To connect cash flow needs to your portfolio allocation and withdrawal rate, you need a process.
In Fritz’s last post, 3 Questions That Determine 99% of Your Retirement Success, he begins with “Do You Have a Reliable Cash Flow Plan?”.
Your cash flow plan is the starting place for connecting your portfolio to your life. I break it into four parts.
- Start with an income timeline — a map of all incoming cash flows that do not come from your portfolio assets. This includes items such as Social Security, pensions, annuity income, deferred compensation payouts with a set schedule, and rental income.
- Next comes an expense timeline. Expenses are rarely linear. Some years may include more travel, a new car, or funding a wedding. Other years may not have such large outflows.
- Then, you calculate the gap, which is the difference between your income and expense timelines. This gap illustrates the year-by-year amount needed from savings and investments.
- Finally, you solve for a tax-managed way to cover that gap, dependent on what account types you have.
This type of process maps your withdrawals down to the account level.
Show me what someone needs to withdraw from which account in which year, and I can recommend a starting allocation.
And while I can calculate the withdrawal rate too, I don’t find the annual withdrawal rate matters so much as long as the lifetime withdrawals result in a reasonable “fundedness” level.
Fundedness is a measure that pension plans use, comparing plan assets to the future cash flows to be delivered. This metric can be applied to a household’s balance sheet just as well as to a pension plan.
I find this process so fundamental that I am befuddled by how someone would come up with a starting allocation or withdrawal rate without first mapping cash flows.
Final Thoughts
Bill’s process leads him to comfortably conclude that a 5.5% gross withdrawal rate is reasonable today – but only as a starting point. It’s not a forever number to follow.
With my preferred process of mapping cash flows and connecting the financial plan to the portfolio, a household’s safe withdrawal rate for the year could be in excess of 10% or below 4%.
But following my process, Fritz’s process, or Bengen’s process isn’t as crucial as making sure you have a process to follow. As for the answer to the article of today’s post (“What’s more important than a Safe Withdrawal Rate?”), I hope the answer is now clear:
Regardless of which withdrawal rate you use in your retirement, the more important question is what process will you establish to keep your spending on track throughout your retirement?
And that, I believe, is the key. Whatever you use – stick by it.
It reminds me a bit of James Clear’s acclaimed book Atomic Habits (Amazon Affiliate link). You need “atomic habits” that you apply to your retirement process.
What about you? If you are nearing retirement, or already retired, what process do you use to determine how much you can safely withdraw? And how often do you measure and reassess? We welcome your thoughts below so we can all learn from one another.
Thank you Dana. Excellent article!
Howdy from the Midwest!
Readers, I believe that the best withdrawal plan is 0. Let me explain. Early before retirement, buy an annuity large enough to cover all of your basic, or essential, expenses annually. Then add in 20% for inflation and non-reoccurring costs. If you can factor in SS payments at 67 or 70 (building a future cash flow chart is recommended), you will ascertain what you will need extra to withdraw from your portfolio once retired fully.
We are so frateful that we did this about 3 years before full retirement! We have cash flow to cover all bills and expenses (excluding lots of travel) to not withdraw from funds if we desire. We give to charity and fully realize that we need to increase our level. In 10 years, our funds have more than doubled. I believe if everyone were to get their cash flow to the point that they need not withdraw any thing, they would have complete peace of mind. I know many are against annuities, but we think that they can serve a very worthwhile purpose if planned appropriately. We have not used a financial advisor, all of our lives we have planned ourselves.
What do you readers think?
God’s blessings to all, Steve
Hello Steven,
I’m biased against annuities but intrigued by your approach! Did you purchase a SPIA? Would you recommend a particular company? Thanks in advance!
We looked at our full retirement income, subtracted our essential expenses and came to just about a $1500 deficit….until we drew SS, now we have an overage. Great problem to have. We purchased a lifetime guaranteed asset type annuity that matured in 10 years, withdraw rate is 5% for life. At age 62, I started our withdrawals. At 72, I will be even with proceeds I gave to Prudential. At 82, we will have doubled our principal. Not indexed for inflation, but the funds stay invested in the market and it has a death benefit, a feature that sold me on it. Our lifetime monthly income now exceeds our spending by about 2K per month now that we draw SS. 10 years after retiring, our plans have worked and our expectations have been exceeded. Peace of mind is huge. Hope this info helps others!
Thanks for sharing your plan. Retirement researchers David Blanchett and Michael Finke developed a paper called “License to Spend,” which shows that people who have guaranteed income sources tend to spend more in retirement. You can find that research here: https://www.protectedincome.org/license-to-spend/
I too am biased against annuities both because it’s inflexible and one is potentially leaving a lot of money on the table. However, I do see the appeal for those who value absolute certainty versus higher potential returns. The only thing that matters is the plan seems to work well for you. It just goes to show that no one approach is correct for everyone.
I am age 67 and have been retired since March ’23. I took SSI right away at 65, not wanting to work anymore. My wife was disabled in her 50s been receiving SSDI. I mostly held a 90/10 portfolio during the accumulation years. Shifted to 80/20 as we got closer to retirement. Our retirement savings was not as much as we would have liked. But when I calculated the income using 4% to 5% at the time and if I had a 60/40 The amount was more than enough to cover our expenses. I used Boldin to estimate to help confirm what I was trying to do with spreadsheets of my own. I knew things like Mod to aggressive portfolio would provide roughly 8 to 10% average over time. A moderate maybe closer to 6 to 8%. As long as my average withdrawals were between 4-5% we would still have some growth. I monitor at year end my withdrawal rate.
Somethings I did was to pay off all debts except the mortgage. I refinanced my mortgage at wow 3% and added a 100 more a month in my payment due to home improvements that were needed like updated baths done by contractor, kitchen complete rehab done by myself & my friend, new roof, new A/C unit. Just before and just after retirement. I stayed within the cost of my savings and added home equity extra monies I refinanced. I knew not to spend more than what I had allocated.
The biggest concern is how to fund European vacations, cash purchases like a newer car, etc. Those dollars will come from tax free accounts. Example I have 25% of our monies in Roth IRAs. So to avoid jumping into a higher tax bracket we will use and do use this monies for such matters.
At year end I determine how much I can convert to Roth’s without moving into another tax bracket to keep those tax free balances ongoing. Only in years we don’t take large vacation expenses.
I move monies out of my brokerage linked to my bank when I need it each month. I do a rolling 12 month % of withdrawal to keep track. I separate out the withdrawals from my money as from taxable and nontaxable accounts to help with my year end estimates of taxes which I do during the beginning of the 4th quarter of the year. We usually have the tax law for the next year already planned out by that time. I use to file taxes for my first job out of college so I still have the skill set. If I didn’t I would hire someone to plan this part.
I too have Bill Bengens book in my kindle ready to read. I enjoyed you comments so much. I feel more calm from your comments. Because allowing more justice to withdraw a bit more than 4% starting point. When I have to have unexpected expense year I might run above 5% to 6% but then back down in years I don’t. As long as my 60% in equities are growing on average over the years I will be ok. I will adjust when the market is down a bit.
I know these are our Go Go Yrs so I want to spend a little more than I have planned originally. So next year we plan on doing some traveling while we can.
I don’t know exactly how all this feeds into not wanting to bit into my principal. Meaning spending above my average expected returns on my monies. Why because we don’t plan of leaving any monies to children. I think once we get to a certain point our long term care needs are needed. My wife never could be covered under a LT Care Policy. I have a permanent life insurance policy to help refund anything. She is 5 yrs older than me and her health isn’t all that great. So even more reason to spend the principal a bit! I feel all any remaining monies may go to nursing homes is my concern and I would rather Medicaid pay for that than not having the ability to do things during our Go Go Years! That is the biggest unknown, sad face.
Steven, it sounds like you have a good plan, and (most importantly) and annual process to keep you on track. Like all of us, the “unknowns” of LTC are always a concern. Like everything in life, we plan to the best of our ability, then deal with the realities when they become known. Thanks for the extensive outline of how you’re managing your money in retirement.
Totally Agree. There are so much correspondence currently about asset allocation in retirement and the ultimate Safe Withdrawal Rate. I have read Randy L. Thurman book -> The All Weather Retirement Portfolio, and he too says 5.5% SWR is feasible with a diversified portfolio of stocks and bonds. No Alts. https://www.youtube.com/watch?v=GB6jUh09U9c
Thank you for sharing your conversations and this article! We enjoyed reading it.
We are early retired with a longer retirement span. Hopefully ….. we did have a plan set out but due to our current set up our withdrawals are based on our current spending, which when I calculated it this morning is 3.8% withdrawal rate.
We adjust each year depending on what the demands are. We still have 2 kids to raise to launch. We anticipate when the youngest is off to school our withdrawal rate could be closer to 5%.
My husband and I are both retired. He is 70 and I’m 73. This was my first year of taking RMD’s. I chose to take the whole amount at the beginning of the year. Between our SS and my RMD, we do not need a safe withdrawal amount! We have no debt and house ( current value 2+ million) was paid off years ago. The first year of RMD’s I chose to reinvest the money since we do fine with just our SS and savings, but this next year, I think I’ll put it in a Money Market account. We have always been savers so spending the money is a new adventure. Our motto now is “we can afford it”. We just got back from vacation in Ireland and flew business class. We used a consolidater (Skylux) which helped lower the price. We still love a bargain!
“We have always been savers so spending the money is a new adventure. Our motto now is “we can afford it”.”
Words I can relate to, Laurel. Congratulations on a job well done.
Cool article. Can you please explain your rationale for asset allocation by account type? I’ve been managing my asset allocation across all account types, then strategically keeping income stuff in pre-tax to qualify for PTC and keeping taxes lower (I’m 55). Finally, I’m also confused on mapping future withdraws to cover future expenses in your financial plan. Isn’t that impossible because you don’t know how the markets will perform? I planned on selling down whatever asset was most above the target (keeping withdraws in the 3-4% range). Thanks for your input.
dap – I outlined the “asset allocation by account type” rational in the following article under the “Asset Location Strategy – Tax Optimization” subheader (about 2/3 of the way through the article):
https://www.theretirementmanifesto.com/our-retirement-investment-drawdown-strategy/
I’ll let Dana address the “future withdrawals to cover future expenses”, but essentially she does a Net Present Value calculation on all expected future spending and income (using a long-term market return assumption) and compares the two to compute the Funded Ratio discussed in her post.
Hi.. happy to try to explain – but it is not easy to do in a short paragraph. We do cover it in detail in our YouTube video How to Make a Retirement Income Plan, which you can find here: https://youtu.be/5sQCrGdiEbY?si=JkxvDFfT43eRW-vW
We allocate each account first in a broad ratio of stocks to bonds – with the bond portion being an income ladder designed to cover the first 5-8 years of planned withdrawals from that account. Roths are generally 100% growth – but not always. Once the stock to bond ratoi of each account is calculated, an asset locatation overlay is applied so highest growth/least tax effecient are in the Roths, most tax effecient growth in brokerage accounts, and stuff that falls in the middle is in the Traditional Pre-tax. This is balanced toward an overall household target portfolio model. We have not found the mapping impossible at all – beend doing it since 2012 so we can look back at the “maps” we did over a decade ago, and reality today, and see exactly how it’s worked.
Interesting article, makes sense.
Wife and I retired at 55/53. We have a pension that covers nearly all our expenses. This combined with dividends from our taxable portfolio more than meets our needs. Our first few years of retirement our WR was under 1% . It would have been zero but we decided to ramp up Roth conversions. As far as a process, we don’t worry much about our WR as all our conservative projections show we’ll have way more money than we’ll ever need. I calculate our withdrawal rate at year end usually when doing rebalancing and tax planning. We’ve shifted more aggressively to giving to family and spending a bit more freely now that we are heading into our 5th year of retirement and have weathered two bear markets with our plan working well. I do continue to stress test our portfolio using Boldin, but I worry about it less and less as time passes. It is encouraging to hear Bill emphasize not getting too tied to a specific WR and to adjust based on conditions and personal situation, it’s essential what we do.
Wade, you’re fortunate to have such a strong pension, and an amazingly low SWR. Like many retirees, you need to learn to spend more money! Wink. (Glad to see your sentence on “shifting more aggressively to giving…and spending more freely” – my wife and I are making that shift, as well).
This is our situation as well. Strong retirement pension and a large Traditional IRA that we just now started to convert to Ruth’s. I did some consulting work after retiring at 58, now 67, so probably made the mistake of not converting sooner. Only reason to convert is due to concern of the widow tax if something happens to either one of us individually. My wife would get 55% of my monthly pension so that with RMDs at 73 would put her into a fairly high singles tax bracket. I have the non-qualified accounts to cover the taxes, and my SS income will cover the higher IRMMA on Medicare. I convert it all by the time we are 73.
Great article. Thanks for the mention, I really enjoyed the interview. Bill Bengen
The “Father of the 4% Rule” himself! I’m honored, Bill. Thanks for stopping by, and congratulations on the (excellent) new book!
Thank you. It was an honor and a pleasure talking with you!
Thank you for the thorough review – increasing to a higher safe withdrawal rate opens up some options for the go-go years that I otherwise might have foregone due to concern for withdrawing too much during those years.
I can’t recommend BoldIn highly enough. I do manage 90% of the planning myself but also have an annual meeting with one of the BoldIn advisors (Bruce) to review and ensure I haven’t missed something. Well worth the one-time fee and I’m paying way less than I was paying to Vanguard for their management service. Maybe sounds silly, but there is some comfort in having a professional look everything over and say “you’re good to go!” Also, I like the ability to forecast one-time recurring expenses (college costs, RV when I finally hit the eject button from my current job, daughters’ weddings in 5-10 years (hopefully!) as well as customize and compare scenarios.
“I can’t recommend BoldIn highly enough.”
I’m with you, Steve. Impressive company, great software, and they keep making it better.
Excellent Article.
We are nearing retirement. We could be retired right now, but my husband isn’t ready to give up work. I’m still learning about withdrawal strategies. I’ve been tracking our expenses for several years with Tiller and therefore have a pretty good idea of our yearly expenses. I add to these expenses an estimate for taxes, retirement travel and healthcare to arrive at a grand total. I think we’ll be able to cover this grand total of yearly expenses with social security and dividends from our taxable account. But if I’m wrong and we need more, I’m considering 1) selling high-basis shares in the taxable account; 2) buying an annuity; or 2) setting up a TIPS ladder. I’ve been trying out MaxiFi Planner to determine our highest annual smooth discretionary withdrawal amount. I’m also trying out Boldin.
Truly a great article Fritz! I can hardly wait to read this book, it’s in my Amazon cart. As I’m nearing retirement, 3 to 5 years out, I will say retirement planning/ retirement is an evolving process, not just the financial
Part. My biggest lesson was 2008. We got scared and pulled the majority of our money out of equities and missed the rebound, costly lesson but we learned from it. We started reading about retirement and investing, met with a CFP and CRP and even follow a few good voices on YouTube, my personal favorite is Erin talks money. In any case following folks like yourself and learning not only from past mistakes but taking a real interest in educating ourselves about retirement has put us in a much better place today. I’m confident my wife and I are setting ourselves up for a successful retirement in the very near future! Thank you for all you do! ❤️
Jay..suggest you include Rob Berger in your youtube watching, and get Boldin retirement software. Both are great additions.
having read the book, the question i have is how transportable are those findings and recommendations if the equity portion of his 55/45/5 were not equally divided into his 5 equity subclasses of large cap, mid cap, small cap, us micro cap and international stocks. a more typical retirees equity allocation will be s&p 500 or total stock market fund with international perhaps in a 70/30 proportion within the equity allocation. the CAPE charts were only up to 23 and currently around 39. he said to shave a few points from the recommendations for a cape of 23. by how much?
when i was starting my investing i was allocating my equity investments to large cap 50%, mid cap15%, small cap 15% international15%, reits 5% and putting in money after whatever was down in order to bring it up. these were mainly in my aftertax accnt as the retirement plans were just in s&p funds i gave this up due to the complexity after 7-8 yrs and stuck with the S&P/total market.