The 4 per cent rule: withdraw about 4 per cent a year in retirement

Verdict

Holds with conditions

The 4 per cent rate held for at least 33 years in the American record of 1926 to 1992 that Bengen examined, in charts built on a portfolio with 50 per cent in shares. The same kind of test on UK and Australian data gives 3.77 and 3.68 per cent even with the best mix chosen in hindsight, and a 2025 study of 38 countries gives 2.31 per cent for a couple aged 65 who accept a 5 per cent chance that the money runs out. Pfau's longer US record from 1900 gives 4.02 per cent only with the best mix chosen in hindsight, and 3.66 per cent with a fixed half-and-half mix. On UK, Australian or many-country data the safe starting rate comes out below 4 per cent.

The cost, from the book's own figures. Taking the rule as stated on a pot of 500,000 means drawing 20,000 in the first year, which is 8,450 more than the 11,550 that the 38-country study supports for a couple who accept a 5 per cent chance that the money runs out.