Mini test 007 / $1 million retirement / 4% rule
Can I retire with $1 million?
It can fund a $40,000 first-year withdrawal under the 4% starting rule, but whether that is enough for you depends on taxes, other income, how long the money must last and the ending balance you need.
A $1 million portfolio fits the 4% starting estimate. The rule aims to make the money last—not preserve the starting balance.
Multiplying $40,000 by 25 gives a $1 million starting target, and 4% of $1 million is $40,000. But success in the original research meant the portfolio was not exhausted before thirty years ended. It did not mean the retiree always finished with the original $1 million, after inflation.
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01 / What 25× spending tells you
How much do I need to retire on $40,000 a year?
Using the 25× starting estimate, $40,000 of annual spending points to a $1 million portfolio before taxes and other income. Divide $40,000 by 4%, or multiply it by 25, and you get the same number. An $80,000 first-year withdrawal points to $2 million.
That arithmetic does not say the portfolio earns 4% every year. It also does not say all spending comes from interest or dividends. The retirement research allowed the investor to sell assets and spend principal when needed.
Twenty-five times spending is a starting estimate—not a promise about the ending balance.
02 / What the rule actually tested
The first withdrawal starts at 4%. Later withdrawals rise with inflation.
The usual rule does not withdraw 4% of the current balance every year. It starts with 4% of the original portfolio, then raises that dollar amount with inflation. If the first withdrawal is $40,000 and inflation is 3%, the next withdrawal becomes $41,200 even if the portfolio fell.
William Bengen's original historical work asked whether that spending could continue for at least thirty years. Current research often asks the same question using a chosen probability of lasting thirty years. Neither test quietly adds a promise to preserve the starting principal.
“Safe” means the tested spending survived the stated period. It does not mean the balance never fell or finished unchanged.
03 / A successful case that still lost principal
One thirty-year historical path ended 4.8% below its starting value.
Later research using Bengen's method gives a direct example. A 50% stock and 50% bond portfolio starting in January 1950 took 4% in the first year, increased the spending with inflation and lasted through December 1979.
Its ending balance was 4.8% below the original balance after inflation. The researchers still counted the withdrawal as a success because the portfolio never ran out.
A retirement can pass the 4% test and still finish with less real principal than it started with.
04 / How to plan for principal as well
Add the ending balance you need as a separate requirement.
If leaving an inheritance, funding care late in life or keeping a permanent reserve matters, “did not run out in thirty years” is not enough. Test the spending plan against that minimum ending balance as well.
Also name the real horizon, taxes, investment costs, other income, asset mix and whether spending can fall after bad markets. Those choices can change both the starting target and the chance of preserving principal.
Use 25× spending as a first estimate. Treat “make it last” and “preserve principal” as two different goals.
Use the free FIRE planner to compare your spending target with three portfolio approaches. For a concrete example, see why a $13,000 monthly withdrawal from $4 million is not automatically a forever payment.
The next useful comparison is our check of why published withdrawal estimates can range from 3.9% to 4.7%.
For income-focused claims, see why OVL's distribution rate is not a dividend yield and whether Texas Instruments dividends covered a 4% withdrawal.
The full receipt
What exactly did we check?
The source claim
The claim came from this X post. It says multiplying annual expenses by 25 produces enough income-generating assets to withdraw 4% annually without depleting principal. We checked the two parts separately: the 25× arithmetic and the principal-preservation promise.
Withdrawal and ending-balance sources
William Bengen's original 1994 paper tested inflation-adjusted withdrawals over long historical retirements. The 1950–1979 example shows a successful 4% withdrawal path ending 4.8% below the original real balance. Morningstar's 2025 retirement-income report reports withdrawal success and ending balances as separate results.
Limits
We did not choose a withdrawal rate, portfolio or legacy target for an individual. The 1950–1979 example comes from a later implementation of Bengen's method with monthly withdrawals and a 50/50 portfolio; it illustrates the definition of success but is not the worst possible ending balance. Historical success does not guarantee the same future result.
This is educational research, not personal financial advice.
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