How Long Will Your Money Last With the 4% Rule?

If you follow the 4% rule, will your money last your whole life? Will there be anything left for your children? In this video I look at what history says.

I start with where the 4% rule came from: Bill Bengen's 1994 paper. You spend a set amount in year one, raise it each year with inflation, and count it a success if the money lasts at least 30 years. Bengen found the answer depended on when you retired. The mid to late 1960s were the worst time, and 4% was the most those retirees could take.

Then I show the difference in FI Calc, using $1 million and $40,000 a year adjusted for inflation over 30 years. Someone who retired in 1995 ended with about $4.2 million. Retirees who started in 1966, 1968 and 1969 ran out of money. 1967 made it, with about $217,000 left.

So the honest answer is that it depends: on when you retire, how the stock market does, and inflation. The 4% rule is a guideline, not a guarantee.

If you want more certainty, I show the perpetual withdrawal rate at Portfolio Charts. It's the rate that kept your starting balance intact, even for the worst start. For a 60/40 portfolio since 1970, it's 3.1%, compared with a 4.1% safe withdrawal rate. I also show how it changes with other portfolios, from 2.9% for 7Twelve to 3.8% for All Seasons, and how to test your own mix.

All of this is based on history, specifically US stocks and bonds. The future could be different.

Resources mentioned in the video:

Bill Bengen's 1994 paper: https://robberger.com/wp-content/uploads/2024/01/retailinvestor.org_pdf_Bengen1.pdf
FI Calc (free retirement calculator): https://ficalc.app
Portfolio Charts withdrawal rates (free): https://portfoliocharts.com/charts/withdrawal-rates/

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0:00 Will the 4% rule last a lifetime?
0:38 Where the 4% rule came from
1:52 The worst time to retire
2:20 Best and worst years in FI Calc
3:19 So how long will 4% last?
4:14 A withdrawal rate that lasts forever
5:58 Comparing other portfolios
6:25 Build your own portfolio
7:16 History isn't a forecast
ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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