The 4% Rule (Safe Withdrawal Rate)

William Bengen derived the rate in 1994 by testing withdrawal schedules against US market history back to 1926, looking for the highest starting rate that survived every 30-year window including the worst. The Trinity Study reached similar conclusions in 1998 and gave the idea its popular name.

The mechanics matter more than the headline. The 4% applies once, to the balance at retirement, and the resulting dollar amount is then raised each year with inflation. It is not 4% of the current balance annually, which is a different and far more variable strategy.

Its assumptions are narrower than its reputation. The finding rests on a 50/50 to 75/25 US stock and bond portfolio, a 30-year horizon, and US market history, which was among the strongest of the twentieth century. Longer retirements, different asset mixes and non-US return series all move the number, which is why Promi runs Monte Carlo across thousands of sequences rather than reporting one rate.