Father Of 4% Rule Actually Used 4.5% For Clients, Here's What He Says To Use Today

Bill Bengen, the “father” of the 4% rule, the safe withdrawal rate for retirement savings, actually used 4.5$ for his clients. Speaking with Michael Kitces, blogger and head of planning strategy at Buckingham Wealth Strategies, on his podcast, Bengen adjusted the rate again noticing that with interest rates as low as they are today, the withdrawal rate may be closer to 5%.

“Originally, I was just working with two asset classes,” explained Bengen. “And then in 2005, while I was working on my book, I introduced small cap stocks, U.S. small cap stocks, which really juiced everything. The return – they didn’t have a perfect correlation with large cap, so that juiced it from 4.15% to almost 4.5%. I use them as a proxy for a wide variety of asset classes, international stocks, REITs, and so on because they’re so powerful in terms of generating higher returns. And that’s when I came up with that number.”

Speaking about how he views the market today, Bengen said, “Right now, I would not be recommending 4.5% to clients as a starting point. Depending upon the inflation level and the level of the market, I might be up to 13%, which historically, there were periods of time when you could take withdrawals that high. It’s not a great time to be taking high withdrawals now with the market so expensive, but it’s not awful either because inflation is very low.”

He added, “I think somewhere in 4.75%, 5% is probably going to be okay. We won’t know for 30 years, so I can safely say that in an interview.”


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