Could 4.7% Be the New Retirement Magic Number?
The 4% rule just got an upgrade — and it could mean thousands more in your pocket every year.
In retirement planning, few ideas have gained more traction — or been more misunderstood — than the 4% rule. It’s the simple notion that you can safely withdraw 4% of your retirement portfolio in the first year, adjust for inflation annually, and never run out of money over a 30-year retirement.
It became gospel.
But now, three decades after publishing his original research, Bill Bengen — the father of the 4% rule — is updating the numbers. According to Bengen, a more accurate safe withdrawal rate today is 4.7%.
That may sound small. But over a $1 million retirement portfolio, it’s the difference between $40,000 and $47,000 of spending in your first year — without increasing your odds of running out of money.
The question for investors nearing retirement is simple: Can we trust it?
First, Let’s Clear Up the Biggest Misunderstanding
Many people assume the 4% rule means you pull 4% of your portfolio every year. That’s not how it works.
Here’s how it actually operates:
In year one, you withdraw 4% of your starting balance.
If you’ve saved $1 million, that means $40,000.
In year two and beyond, you increase that initial dollar amount by inflation.
If inflation is 3%, you now withdraw $41,200 — regardless of whether your portfolio went up, down, or sideways.
That’s it. No market timing. No adjusting for returns. Just inflation-adjusted, predictable income — designed to preserve purchasing power over a 30-year retirement.
It’s not flashy. But it’s comforting in its simplicity.
Still, it comes with baggage.
The Hidden Assumptions Behind the 4% Rule
The original 4% rule wasn’t meant to be one-size-fits-all. In fact, it was carefully stress-tested against the worst-case U.S. market conditions from 1926 to the 1990s — including the Great Depression and the stagflation of the 1970s.
But it makes some big assumptions. And if those don’t line up with your real life, the “safe” withdrawal rate might not be so safe.
Let’s unpack them:
1. You’ll Retire for Exactly 30 Years
The 4% rule assumes a neat, 30-year retirement. Retire at 65, live until 95 — simple.
But what if you retire early? Or live to 100?
Longer retirements stretch portfolios thinner. A 35- or 40-year horizon may require a lower withdrawal rate, closer to 3.5%–4.0%.
2. You Have a Balanced Portfolio (Typically 50/50 Stocks and Bonds)
Bengen’s model assumed a middle-of-the-road asset mix: 50% large-cap U.S. stocks, 50% intermediate-term U.S. bonds.
If your portfolio is more conservative (like 70% bonds), your risk of running out increases. If it’s more aggressive, volatility could hurt you — especially early in retirement.
3. Markets Will Perform Like They Did in the Past
The original analysis relied on historical U.S. returns, when stocks averaged 7%+ real returns and bonds paid 5% or more.
Today’s landscape is different: high valuations, lower bond yields, and uncertain inflation. If returns underwhelm, that 4.7% withdrawal may prove optimistic.
4. You Won’t Adjust Spending When Markets Crash
One of the oddest quirks of the rule is that it ignores portfolio performance. If the market drops 30% in year two, you’re still supposed to spend the inflation-adjusted amount from year one.
This protects purchasing power, but doesn’t protect against sequence of returns risk — the danger that early losses, combined with withdrawals, drain your portfolio faster than expected.
5. You Won’t Have Big Financial Surprises
The 4% rule assumes a steady, predictable retirement lifestyle.
But real life doesn’t work that way. Health costs rise. Family emergencies happen. You might want to travel more in the early years — or spend more on home renovations later.
A few years of high spending can throw off the whole plan.
6. You’re Not Paying High Fees
Here’s one people often forget: the 4% rule assumes minimal fees.
If you’re paying 1% in advisor fees, and another 0.5%–1% in fund management costs, you’re already down 1.5%–2% before spending a dollar.
That can reduce your safe withdrawal rate to closer to 3.5%.
What to Take Away — and What to Do About It
The 4.7% upgrade is encouraging. It means that — under certain conditions — retirees may be able to spend a little more without increasing their risk.
But that number only works if all the original assumptions hold. And in today’s world, that’s a big “if.”
Instead of blindly following the 4% (or 4.7%) rule, consider it a starting point — a baseline for building a more personalized, flexible strategy.
Some modern twists worth considering:
Guardrails: Adjust withdrawals up or down depending on market performance.
Bucket strategies: Separate your cash, bonds, and stocks by time horizon to manage volatility.
Variable spending plans: Spend more early in retirement, then tighten the belt later.
Annuities: Shift some of your portfolio to guaranteed income to lower the pressure on withdrawals.
Tax planning: Use TFSAs, RRSPs, and non-registered accounts strategically to improve after-tax income.
Bottom Line
The 4% rule — or its new 4.7% cousin — can be a helpful guide. But it’s not a substitute for a real plan.
Your retirement will be shaped by more than just numbers: markets, inflation, your health, your goals, your family. The math matters, but the map is personal.
And that means it’s worth revisiting your withdrawal strategy regularly — especially when the world around you is changing fast.
Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence and consult with a financial advisor before making investment decisions.