Is the 4% rule still safe? How to find your own safe spending number
If you've read anything about retirement, you've met the 4% rule: withdraw 4% of your savings in your first year of retirement, raise that amount with inflation every year after, and your money should last about 30 years. It's simple, it's memorable, and for a lot of people it's the only retirement math they ever do.
It's also a rule of thumb built for someone who isn't you. Here's what it actually assumes, and how to get a number that fits your situation.
What the 4% rule assumes
The rule came out of studies of historical US stock and bond returns. It answers one narrow question: what starting withdrawal rate would have survived a 30-year retirement through most of the historical record? Baked into that are a few assumptions worth knowing:
- A 30-year horizon. Retire at 55 and you may need 40 years. Retire at 70 and 30 years may be more than you need.
- Fixed, inflation-adjusted spending. Real retirees cut back after a bad year and spend more after a good one. The rule assumes you never adjust.
- No other income. Social Security, a pension or part-time work all change how much your portfolio has to carry.
- US historical returns. The future doesn't have to look like the past.
Where the averages mislead you: sequence of returns
Two retirees can earn the same average return over 30 years and end up in completely different places. If one of them hits a crash in the first few years of retirement, they're selling investments while prices are down, and those shares never get the chance to recover. This is called sequence-of-returns risk, and it's the main reason a plan that looks fine on an average-return spreadsheet can still fail.
That's why planners use Monte Carlo simulations instead of a single projection. A Monte Carlo run plays out thousands of randomized market paths, so the bad-timing scenarios show up in your results instead of being averaged away. The output is a success rate: the share of paths where your money lasted.
What success rate should you aim for?
Most planners consider 80–90% a solid target. Below about 75%, your plan is leaning on good luck. Above about 95%, you're probably underspending — giving up a better life today to protect against scenarios that are very unlikely. The right number depends on how flexible you are: if you could trim spending in a bad year, a lower success rate is reasonable.
Finding your number
Instead of starting from 4% and hoping, flip the question around: what's the most I can spend each year and still hit the success rate I'm comfortable with? To answer it you need a few inputs:
- Your current age and when you plan to retire
- Your retirement savings today, and how much you're still adding each year
- Your expected Social Security benefit (your statement at ssa.gov shows it)
- The success rate you want
Our free safe retirement spending calculator solves for exactly that, with a default target of 85%. If you'd rather see how a specific spending level holds up, the Monte Carlo retirement simulator stress-tests your plan — including a "real history" mode that replays actual market sequences, crashes included. Neither one needs a signup.
The short version
- The 4% rule is a reasonable first guess, not a plan.
- Sequence-of-returns risk matters more than your average return.
- Aim for an 80–90% success rate, and lower if you can flex your spending.
- Work backward from your own age, savings and Social Security to find your number.
MaliMoney is an educational tool, not a licensed financial advisor. For decisions with big tax or legal consequences, talk to a qualified professional.