Mini test 002 / Retirement withdrawals / Conflicting rules
Does the 4% rule still work?
As a starting point, yes. As one answer for every retirement, no. Bill Bengen's historical work now points to 4.7%, while Morningstar's forward-looking estimate says 3.9%. For someone who wants $40,000 a year, that appears to create a $175,000 disagreement. We checked what each number actually measures.
The arithmetic is right. The apparent disagreement is not.
The two headlines use different assumptions about future returns and portfolio risk. Morningstar's own research reaches 4.7% when it replaces its cautious forecasts with historical returns and uses a 90% stock portfolio. That is the clearest proof that 3.9% and 4.7% are scenarios—not rival universal truths.
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01 / What Bengen actually changed
He did not discover that the original work was false.
Bengen now describes the original result as 4.15%: the largest first-year withdrawal in his historical data that still lasted at least thirty years, followed by inflation increases each year. It came from reconstructing actual US retirement periods, not forecasting the next thirty years.
He also says he never intended one number for every retiree. His later research broadened the portfolio and “morphed” the result into 4.7%. That changes the tested portfolio and evidence; it does not turn 4.7% into a promise about every future retirement.
Bengen's expanded figure also depends on adding small-company stocks. Their strong historical returns help the result, but a future retiree cannot assume that advantage will repeat.
The fair summary: Bengen expanded a historical worst-case test. He did not prove that everyone can safely spend 4.7%.
02 / Why Morningstar says 3.9%
Morningstar is asking what a new retiree might face next.
Its base case creates 1,000 possible thirty-year futures from current forecasts for returns, volatility, and inflation. The withdrawal must fund the same inflation-adjusted spending in at least 900 of them. Under those assumptions, portfolios with 30% to 50% in stocks supported the highest starting rate: 3.9%.
The model omits taxes and investment fees, and Morningstar calls the setup conservative: fixed real spending, cautious expected returns, and a 90% success requirement.
This is a forward-looking planning estimate, not a claim that 4.7% failed in the historical record.
03 / The decisive cross-check
Change one major assumption and Morningstar also reaches 4.7%.
Morningstar reran its model using long-term historical returns instead of its forward-looking forecasts. The rate rose to 4.4% for a half-stock, half-bond portfolio and 4.7% for a portfolio with 90% in stocks.
This is still a Monte Carlo test, not a replay of actual historical retirements. Morningstar changed the return assumptions inside the same simulation.
That does not make 90% stocks the best retirement portfolio. It produces a higher modeled withdrawal rate, with much larger swings. Morningstar also notes that its more conservative allocations reduce potential wealth left after thirty years.
The 0.8-point gap mostly tells you the assumptions changed—not that one research team made a $175,000 mistake.
04 / What to do with the result
Do not lower your FIRE target from one updated headline.
First choose the real planning question: a thirty-year retirement or longer, fixed or flexible spending, a cautious or stock-heavy portfolio, and whether taxes and fees are inside the spending number. Then compare the same plan under both cautious forecasts and historical returns.
A person willing to reduce spending after bad markets can often start higher than a person who needs the same inflation-adjusted amount every year. That is a real tradeoff, not a free increase.
Use 3.9% and 4.7% as stress cases. The right target depends on which promises your portfolio must keep.
05 / What the 4% rule includes
Social Security, taxes, inflation and an early retirement change how to use it.
Does the 4% rule include Social Security?
No. The rule applies to withdrawals from the investment portfolio. Social Security, pensions and other reliable income reduce the amount that portfolio must supply.
Does the 4% rule include taxes?
The research compared portfolio withdrawals before an individual retiree's taxes and investment fees. If the portfolio must also pay those costs, include them in the amount the portfolio needs to support. The account type changes the tax result.
Does the 4% rule account for inflation?
Yes. The usual rule applies 4% to the starting portfolio once, then raises that dollar withdrawal with inflation in later years. It does not keep taking 4% of the changing balance.
Does the 4% rule work for early retirement?
The figures checked here use a thirty-year horizon. Someone who may need the money for forty or fifty years needs a separate longer test instead of assuming the same rate still works.
Use the free FIRE planner to compare your spending target with three portfolio approaches. If preserving the starting balance matters, read why the 4% rule does not promise to preserve principal.
The full receipt
What exactly did we check?
The target arithmetic
| Starting rate | Portfolio for $40,000 | What it represents |
|---|---|---|
| 3.9% | $1,025,641 | Morningstar forward-looking base case |
| 4.15% | $963,855 | Bengen's original historical finding |
| 4.7% | $851,064 | Bengen's expanded historical research |
Dividing $40,000 by 3.9% and 4.7% produces a difference of $174,577, which reasonably rounds to the post's $175,000.
Primary sources
The claim came from this X post. Bengen's own explanation is on his 4% Rule page, and his original paper is identified by the Financial Planning Association. Morningstar's assumptions and cross-check are in The State of Retirement Income: 2025.
Limits
This claim check does not reproduce either research system from raw market data, audit Bengen's expanded portfolio, or choose a withdrawal rate for an individual. It checks whether the two headline figures are arithmetically correct and whether their published assumptions make them genuinely contradictory.
This is educational research, not personal financial advice.
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