#SAVINGS & FINANCIAL PRODUCTS
The "4% rule" says you can withdraw 4% of your capital every year without ever exhausting it. In the study that established it, the rule holds in 95% of thirty-year periods with half the portfolio in equities, and in 20% with no equities at all.
Published on September 9, 2026
In February 1998 three finance professors at Trinity University published in the AAII Journal the test that became the reference: using US returns from 1926 to 1995, they counted the share of retirement periods a portfolio funded to the end. With withdrawals adjusted for inflation, an initial rate of 4% and a thirty-year horizon, the success rate is 98% with three quarters in equities, 95% with half, 71% with a quarter and 20% with none. Four years earlier William Bengen had arrived at the same 4% figure.
Does the 4% rule depend on what you hold?
Entirely. The same withdrawal rate moves from 98% to 20% success depending on the equity share.
In other words: the most quoted rule in retirement planning is a rule about equities, not about withdrawals.
Five caveats that belong with the number
- The rates cover 41 overlapping thirty-year periods, not 41 independent draws: 95% means two failures, close together in time.
- The data are American, from 1926 to 1995, using the S&P 500 and high-grade corporate bonds.
- The study adjusts for neither taxes nor transaction costs, as its authors state explicitly.
- Withdrawals are indexed to inflation and never adjusted to the market; the authors themselves note that mid-course corrections will likely be required.
- Bengen measures a minimum survival horizon, the Trinity study a success rate: the two figures answer different questions.
Why it still matters: a withdrawal rate without an allocation and a horizon is not a rule.
For you
- When you are quoted the 4% rule, is the equity share it was measured on ever named?
- Does a plan that fails in one historical period out of twenty deserve to be called a rule?
Source: Cooley, Hubbard and Walz, AAII Journal, February 1998, table 3; Bengen, Journal of Financial Planning, October 1994.
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