For decades, retirees have leaned on a simple guideline to figure out how much they could spend without running out of money: the 4% rule.

It was designed as a safe path to steady withdrawals and peace of mind.

But financial planners now say it’s time for an update.

Thanks to new research and stronger market performance, that number has shifted upward—to 4.7%—and for retirees, it could mean a noticeably bigger paycheck every year.


Back in 1994, financial planner Bill Bengen crunched the numbers and came up with a formula that changed retirement planning forever.

The idea was simple: if you withdraw 4% of your retirement savings in your first year and then adjust that amount for inflation each year, your money should last at least 30 years—even if the market hits a few bumps along the way.

For example, if you retire with $500,000, you’d take out $20,000 the first year. If inflation is 3%, you’d take out $20,600 the next year, and so on.

The rule was designed to be conservative, to help retirees avoid the nightmare scenario of outliving their savings.


Bill Bengen himself has been tinkering with the formula for years. The original rule was based on a portfolio split evenly between large US stocks and government bonds.

But today’s retirees have access to a much wider range of investments—think international stocks, small and mid-sized companies, real estate, and more. Plus, the stock market has performed better than expected in recent years.

Bengen’s latest research, which now includes seven different asset classes and a slightly more aggressive mix (55% stocks, 40% bonds, 5% cash), shows that retirees can safely withdraw 4.7% a year. That’s a significant bump—especially over a 30-year retirement.

And Bengen isn’t just talking the talk. When he retired in 2013, he started with a 4.5% withdrawal rate. Thanks to strong market returns, he’s now up to 4.9%—and still going strong.


Also read: How one retiree saved $638 a month by cutting these 5 common bills

If you’re already retired or planning to retire soon, this update could mean a bigger “paycheck” from your savings each year.

On a $500,000 nest egg, the difference between 4% and 4.7% is $3,500 a year—enough for a few extra trips, dinners out, or spoiling the grandkids.

But before you start celebrating, it’s important to remember that the 4.7% rule isn’t a one-size-fits-all solution. Here’s why:

• Your Investment Mix Matters: The new rule assumes a diversified portfolio with a healthy dose of stocks. If you’re mostly in bonds or cash, you’ll need to be more conservative.
• Markets Change: The 4.7% rule is based on historical data, but the future is always uncertain. A big market downturn early in retirement can still throw a wrench in your plans.
• Your Spending isn’t Static: Most retirees don’t spend the same amount every year. You might travel more in your 60s, then slow down later. Medical expenses can also spike unexpectedly.
• Inflation is a Wild Card: The cost of living can rise faster than expected, especially for healthcare.

Also read: The hidden retirement crisis leaving thousands of seniors without a home

Financial experts agree: the best retirement plan is a flexible one. The 4% (or 4.7%) rule is a great starting point, but it shouldn’t be set in stone. Review your spending and investments every year.

If the market’s been kind, you might be able to give yourself a raise. If things get rocky, tighten your belt for a while.

As Rob Williams of Charles Schwab puts it, “A modern retirement plan is a living document.” It should change as your life and the world around you change.

Here’s the tough truth: the 4% rule works best for folks with substantial savings. The average American between 55 and 65 has about $185,000 saved for retirement. At 4%, that’s just $7,400 a year—not exactly a ticket to the good life.

Read next: Five free or low-cost retirement perks you may be overlooking
Have you used the 4% rule in your own planning? Are you considering bumping up to 4.7%? Or do you have your own strategy for making your money last?