The Popular 4% Rule for Retirees Just Got an Update

William Bengen’s popular retirement withdrawal rate just got a raise — it’s now 4.7%.

Bengen is the financial planner who introduced the famous “4% rule” in the Journal of Financial Planning in 1994. He found that retirees could count on their retirement savings lasting at least three decades if they started by withdrawing 4% of their money and then increased the dollar amount they're withdrawing each year to keep up with inflation. The strategy caught on because it offered an easy, research-backed way for retirees to gauge how much they could spend without draining their savings. And three decades later, it's still considered the default for many retirees trying to ensure their money doesn't run out.

Now, in his new book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, Bengen says the safe withdrawal rate is actually closer to 4.7% — meaning a retiree with a $1 million portfolio could spend $47,000 instead of $40,000 and then adjust the total for inflation to maintain purchasing power every year. The new figure is based on an updated analysis of investment returns of hundreds of retirees dating back to 1926.

“My research is more sophisticated… I've increased the number of assets and created a more diversified portfolio,” Bengen recently told Yahoo Finance, noting that his previous research only used portfolios with U.S. bonds and large U.S. stocks. Now he's incorporated international stocks as well as stocks from small and mid-size companies. “Each one of them has [its] own cycle of investing, and each contributes to the diversification of the portfolio and increases the withdrawal rate."

Still, even with his updated analysis, he cautions that no single withdrawal rate works for everyone, and no rule can guarantee that your money will last. Market volatility, inflation, health care costs and other factors all play a role. “Inflation, in my opinion, is the greatest enemy of retirees,” he told Yahoo Finance. “During the 1970s, inflation was 8% or 9% a year for 10 years, and it devastated portfolios."

That period, Bengen explains in an email to Money, forced retirees to pull money from their investments at an accelerated pace just to keep up with rising prices. Many ran out of money sooner than expected, while others had to slash their withdrawals to preserve their savings. It's the kind of high-inflation scenario that shaped his current 4.7% figure, which he describes as a cautious starting point and not a hard rule.

"The 4.7% rule is the worst-case scenario," Bengen said, meaning that many retirees may be able to afford withdrawing at a higher rate depending on economic conditions. For today's retirees, he added, "I'd probably recommend something around 5.25% to 5.5%."

The worst-case number comes from an unusually harsh period in U.S. stock market history, when back-to-back bear markets and years of high inflation combined to punish portfolios, Bengen said. Today's retirees still face some headwinds, like elevated stock market valuations (which is a negative for withdrawal rates), but they're also benefiting from more moderate inflation — making higher withdrawal rates possible.

Is the 4% rule still relevant?

While Bengen’s update gives retirees a slightly higher starting point, some experts argue that the 4% rule is a dated concept. Critics note that it doesn't account for other income sources, like Social Security, and offers little flexibility for adjusting spending as circumstances change.

Other experts like the concept of the flat withdrawal rate, but disagree on the precise figure that will be safe in decades to come. While Bengen's number is drawn from nearly a century of historical market performance, Morningstar's latest State of Retirement Income report takes a future-focused approach. The authors recommend a more cautious 3.7% withdrawal rate as the sweet spot for a 30-year retirement based on projections for market returns, inflation and interest rates. That said, the report does note that retirees would be safe to start a withdrawal rate above 4% in a variety of circumstances, including if they owned Treasury Inflation-Protected Securities (TIPS) or bonds designed to protect against inflation. Retirees who anticipate following traditional spending patterns, which show that people spend less as they get older, could also start at a higher rate and still not run out of money, Morningstar says.

Bengen’s research remains a useful benchmark, especially for those who prefer a straightforward starting point to retirement planning. The key — according to both Bengen and critics of his rule — is that retirees should tailor withdrawals to their situation, rather than sticking to a one-size-fits-all percentage.

As Bengen told Yahoo Finance, “Everyone is different. Personalize it for your situation.”

More from Money:

It Might Be Time to Ditch These Two Retirement 'Rules'

Americans' 'Magic Number' for a Comfortable Retirement Has Dropped $200K

Over Half of Older Employees Plan to Work 'Indefinitely' and Never Retire