The 4% rule explained

The short answer

The 4% rule says you can withdraw 4% of your portfolio in your first year of retirement, then raise that dollar amount with inflation every year, and in US history the money lasted at least 30 years. For an early retirement that may last 40 to 60 years, research points to a lower starting rate, roughly 3% to 3.5%, unless you're willing to cut spending after bad markets.

The rate you pick sets your FIRE number, and through it your Coast FIRE date. Moving from 4% to 3.5% raises the target from $1,000,000 to $1,142,857 for $40,000 of yearly spending, and pushes our example coast date back by three and a half years.

What the 4% rule says

The rule is about spending, not about a fixed share of whatever your portfolio is worth each year. It has two steps:

1. Year one: take out 4% of your starting portfolio. On $1,000,000, that's $40,000.
2. Every year after: take out last year's amount plus inflation. If prices rose 3%, year two's withdrawal is $41,200, whether markets went up or down.

So your spending power stays level for the whole retirement, and the portfolio absorbs all the market risk. In a bad decade, your withdrawals become a much bigger share of a shrinking balance. That's the danger the rule was built to survive.

Turned around, the rule gives you a target to save for:

That's why the 4% rule and the "25x rule" are the same thing. If FIRE itself is new to you, start with what FIRE is and how the math works.

Where it comes from

Bengen, 1994. Financial planner William Bengen tested withdrawal rates against US market history starting in 1926. He looked at retirees starting in each year, with a portfolio of stocks and intermediate-term Treasury notes, and asked how long the money lasted. A 4% first-year withdrawal, raised each year with inflation, never ran out in less than 33 years in any of his historical start years. He suggested holding between 50% and 75% in stocks, and concluded that about 4% was the right starting rate for clients retiring between 60 and 65. His paper is in the Journal of Financial Planning.

The Trinity study, 1998. A follow-up in the AAII Journal, widely called the Trinity study, used US data from 1926 to 1995. It tested withdrawal rates from 3% to 12%, five mixes from all stocks to all bonds, and payout periods of 15, 20, 25 and 30 years. With withdrawals raised for inflation, rates of 3% to 4% kept high success rates for portfolios mostly in stocks.

What the studies tested, and what they didn't

Four limits matter if you're planning to retire early:

• Thirty years was the design goal. A 60-year-old with a 30-year plan is covered to 90. Someone retiring at 40 needs the money to last far longer.
• US history only. Both studies used one country's past returns. The future may be kinder or harsher, and a different country's history would give a different answer.
• No costs or taxes. The Trinity study says plainly that it did not adjust for taxes or investment costs. Every 1% in fees comes straight out of the returns the rule relies on.
• "Success" means not running out. A plan that ends with one dollar left counts as a success.

What changes for a 40- to 60-year retirement

The longer your money has to last, the less you can take out each year. You have more years in which a bad stretch of markets can do damage, and you can't count on spending down your principal near the end.

The most detailed public work on long retirements is the safe withdrawal rate series by Early Retirement Now. It tested monthly US stock and 10-year Treasury returns from 1871 to 2016, over horizons of 30 to 60 years. Two findings stand out:

• With half stocks and half bonds, a 4% withdrawal rate succeeded in about 95% of historical 30-year periods but only about 65% of 60-year periods.
• For a mostly-stock portfolio, the safe rate for 60 years averaged more than a full percentage point below the 30-year rate. The series concludes that "3.5% is the new 4%" for early retirees, and that the rate may need to be lower still when stocks are expensive.

Forward-looking estimates point the same way. Morningstar's 2026 estimate of a safe starting rate is 3.9% for a 30-year retirement, using a 30% to 50% stock mix and a 90% chance of the money lasting. Its yearly figure moves with market valuations and bond yields, and has ranged from 3.3% to 4.0% in recent reports. A longer horizon would generally support less.

For Coast FIRE, your retirement age matters here. If you coast toward retiring at 60 or 65, your horizon is close to the 30 years the classic studies tested. If you're aiming for full FIRE at 45, it isn't. The order of returns is the main reason long retirements are harder; our guide to sequence of returns risk explains why.

FIRE numbers from 3% to 4%

Here's what each rate means for $40,000 a year of spending in today's money. The last column assumes our example saver, Alex, keeps investing $1,500 a month from $185,000 today, with a 7% return and 2.5% inflation.

Going from 4% to 3% adds a third to the target but only about five years to the saving, because the last stretch is when compound growth does the most work. Still, $333,333 is a lot of extra money, so the rate is worth choosing carefully rather than by habit.

How the rate moves your coast date

Coast FIRE is reached when your investments can grow into your FIRE number by retirement with no more saving. A higher target means a later coast date. Using Alex again (age 32, retiring at 60, $185,000 invested, $1,500 a month, 7% return, 2.5% inflation, no fees):

Dropping to 3.5% adds 3 years 6 months of saving, and dropping all the way to 3% adds 9 years 4 months. Compare that with the full FIRE date in the previous table, which moves by less than five years over the same range. The coast date is more sensitive because coasting relies entirely on growth from a smaller base.

One thing doesn't change. In our simulation of 1,000 markets, stopping exactly on the coast date reaches the target by 60 in about 50% of them at every rate in the table (51% at 3%, 50% at 4%). A lower withdrawal rate protects the years after you retire. It doesn't make the coasting years any safer. For that you need a buffer, such as saving a little past your coast date, as our guide to reading Monte Carlo odds explains.

Flexible spending and guardrails

The 4% rule assumes you never adjust. You take the same inflation-adjusted amount through a crash and through a boom. Real retirees rarely behave that way, and being willing to adjust is one of the strongest protections you have.

Common flexible approaches include:

• Guardrails. You start at a chosen rate and set an upper and a lower limit. If a market fall pushes your current withdrawal above the upper limit as a share of the portfolio, you cut spending by a set step. If strong markets push it below the lower limit, you give yourself a raise.
• Skipping inflation raises after down years. You keep last year's dollar amount instead of adding inflation, which slowly trims real spending only when it matters.
• A fixed percentage of the current balance. You withdraw the same percentage of whatever the portfolio is worth each year. You can't run out, but your income swings with the market.

Morningstar's research finds that flexible methods like these support higher starting rates than the fixed approach, at the cost of a paycheck that changes from year to year. How much flexibility you really have depends on how much of your budget is essential. Rent, food and insurance are hard to cut. Travel is easy. Income that starts later, like Social Security, also lowers the withdrawals you need from that point on.

Our calculators keep things simple and assume level spending in today's money, as described on our methodology page. If you plan to be flexible, you can reasonably use a slightly higher rate than someone who isn't.

How to pick a rate in our calculators

There's no single correct rate, but a few questions narrow it down:

• How long must the money last? Around 30 years: 3.5% to 4% is in line with the research above. 40 years or more: 3% to 3.5% is the range long-horizon studies support.
• How flexible is your spending? If a big share is optional, you have room to cut in bad years and can lean toward the top of your range.
• What other income will you have? Subtract a pension or Social Security from your yearly spending only if you'll retire around the age it starts. If you retire earlier, you also need money to bridge the gap years before it begins. The same applies to CPP and OAS in Canada and the State Pension in the UK.
• Does your spending include taxes and fees? The rate applies to the gross withdrawal, so your spending figure should include the tax you'll pay on it.

In the Coast FIRE calculator, set the rate under Assumptions as the safe withdrawal rate. The FIRE number calculator shows your target at several withdrawal rates side by side, which is a quick way to see what each extra margin of safety costs. Try your plan at 4% and at 3.5%, and treat the gap as the range you're planning within. Then revisit it every year or so, as your horizon and the markets change.

Sources

The worked examples are our own calculations, explained on our methodology page. Research figures were checked against these sources in October 2026:

1. Determining Withdrawal Rates Using Historical Data. William P. Bengen, Journal of Financial Planning, 1994. The original 4% rule: a 4% first-year withdrawal, raised each year with inflation, lasted at least 30 years in every historical US period studied.
2. Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable. Philip L. Cooley, Carl M. Hubbard and Daniel T. Walz, AAII Journal, 1998. The “Trinity study”: withdrawals of 3% to 4% rarely ran out of money over periods of up to 30 years with a mix of stocks and bonds.
3. The Ultimate Guide to Safe Withdrawal Rates, Part 1: Introduction. Early Retirement Now, 2016, updated 2024. Safe withdrawal rates for 60-year retirements average more than a percentage point below 30-year ones; it concludes that “3.5% is the new 4%.”
4. What’s a Safe Retirement Withdrawal Rate for 2026?. Morningstar. Puts a safe starting withdrawal rate at 3.9% for a 30-year retirement, with a 90% chance of success.