The 4% rule has been a cornerstone of retirement planning since it was introduced by financial planner William Bengen in 1994. The rule posits that retirees can withdraw 4% of their retirement savings each year, adjusted for inflation, and still have a high probability that their savings will last 30 years. But with today’s high inflation and market volatility, many are asking: is the 4% rule still a safe bet?

What is the 4% Rule?

Originally designed for conservative retirement planning, the 4% rule was based on historical market data from 1926 to 1976, covering multiple recessions and bull markets. According to Bengen, a 4% annual withdrawal rate would have worked 95% of the time, helping to ensure a steady income for most retirees without running out of money. However, some retirement analysts argue that this “one-size-fits-all” approach no longer applies.

Why the 4% Rule May No Longer Be Enough

1. Inflation Concerns: As of February 2025, the Consumer Price Index (CPI) rose 2.8% over the past 12 months, indicating a moderate inflation rate. High inflation reduces the purchasing power of a fixed 4% withdrawal, forcing retirees to either spend less or risk depleting their funds faster.
2. Market Volatility: The 2020s have already seen historic market swings, with the S&P 500 dropping by over 30% in early 2020 due to the COVID-19 pandemic. Morningstar’s 2024 research suggests a safe withdrawal rate of 3.7% for retirees, reflecting current market conditions and return expectations. (Morningstar, 2024).

Alternatives to the 4% Rule

• Dynamic Withdrawals: Adjust your withdrawal rate based on annual portfolio performance to help protect your funds in market downturns.
• The Bucket Strategy: Split funds into “buckets” for immediate needs, short-term goals, and long-term growth to diversify risk.
• Inflation-Protected Investments: Including assets like Treasury Inflation-Protected Securities (TIPS) and real estate in your portfolio can help protect against inflation.

While the 4% rule remains a solid foundation, it’s wise to consider a more flexible approach in today’s economy.

---

Sources:

• U.S. Bureau of Labor Statistics. (2025). Consumer Price Index Summary. Retrieved from https://www.bls.gov
• Morningstar. (2024). How Retirees Can Determine a Safe Withdrawal Rate in 2025
• . Retrieved from https://www.morningstar.com
• S&P Global Market Intelligence. (2020). Market Decline During the COVID-19 Pandemic. Retrieved from https://www.spglobal.com

Insurance products are offered through the insurance business McIntosh & Associates, Inc.. McIntosh & Associates, Inc. is also an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Adviser. AEWM does not offer insurance products. The insurance products offered by McIntosh & Associates, Inc. are not subject to Investment Adviser requirements. Investing involves risk, including the potential loss of principal. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 2941624 – 3/25