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FIRE basicsThe 4% rule explained
The 4% rule says you can take 4% of your portfolio in your first year of retirement and raise that amount with inflation every year after. With $1,000,000, that is $40,000 in year one. Morningstar's latest estimate for a 30-year retirement is 3.9%, and it falls to 2.9% for 50 years.
What the 4% rule says
In year one you withdraw 4% of the portfolio. From then on you stop looking at the percentage and adjust the dollar amount for inflation: if prices rise 3%, the second withdrawal is $41,200. The rule is about how long the money lasts, so the portfolio is allowed to run down to almost nothing by the end of the period.
Where it comes from
William Bengen, a financial planner, published "Determining Withdrawal Rates Using Historical Data" in the Journal of Financial Planning in October 1994. He tested starting withdrawals, raised with inflation each year, against US market returns for retirements beginning in different years, and found that about 4% held up even through the worst periods he studied.
In 1998, three finance professors at Trinity University, Philip Cooley, Carl Hubbard and Daniel Walz, ran a similar test with stock and bond returns from 1925 to 1995 and retirements of 15 to 30 years. Withdrawals of 3% to 4%, raised with inflation, had high success rates for portfolios mostly in stocks. The authors presented the result as a planning guide that may need adjusting along the way.
The 25x shortcut
If 4% of the portfolio pays for a year, the portfolio is 25 times your yearly spending, because 1 ÷ 0.04 = 25. That is where the usual FIRE number comes from: $40,000 a year needs $1,000,000 and $60,000 needs $1,500,000. The full table by spending and withdrawal rate is in how to calculate your FIRE number.
How long $1,000,000 lasts at each withdrawal rate
To show the mechanics, this table gives the portfolio a steady return after inflation. Each withdrawal is taken at the start of the year and stays the same in today's dollars.
| Withdrawal rate | First year | 0% real | 2% real | 3% real | 4% real |
|---|---|---|---|---|---|
| 3% | $30,000 | 33.3 years | 53.5 years | 119.6 years | Indefinitely |
| 3.5% | $35,000 | 28.6 years | 41.5 years | 60.4 years | Indefinitely |
| 4% | $40,000 | 25.0 years | 34.0 years | 44.1 years | 83.1 years |
| 4.5% | $45,000 | 22.2 years | 28.9 years | 35.3 years | 49.2 years |
| 5% | $50,000 | 20.0 years | 25.1 years | 29.6 years | 37.4 years |
With no growth at all, 4% lasts exactly 25 years. A 3% return after inflation stretches it to 44.1 years, and at 4% the returns almost pay for the withdrawals. Real markets move up and down, so the order of returns matters too: a fall in the first years of retirement does more damage than the same fall later, because you sell more of the portfolio at low prices to pay for the same spending.
Same average return, different order
Two retirees start with $1,000,000 and take $40,000 a year. Both get the same 30 yearly returns after inflation: a fall of 20%, then 10%, then a flat year, and 6% in each of the other 27 years. One gets the bad years first and the other gets them last, so both earn a compound average of 4.24% a year.
After 30 years the retiree with the bad years first has $265,583 left; the one with the bad years last has $1,437,679. Taking $45,000 a year instead, the first portfolio runs out in year 28. Losses early in retirement hurt most because each withdrawal sells a bigger share of a smaller portfolio. These returns are an illustration chosen to show the effect, not a forecast or a historical period.
Is 4% still safe?
Morningstar recalculates a safe starting rate every year, using forward-looking return assumptions and 1,000 simulated paths of returns. Its base case is a portfolio of 40% stocks and 60% bonds, spending that rises only with inflation and a 90% chance of the money lasting. On those terms the starting rate for 30 years is 3.9%, and it falls as the retirement gets longer:
| Retirement length | Morningstar starting rate | Portfolio for $40,000 a year |
|---|---|---|
| 30 years | 3.9% | $1,025,641 |
| 35 years | 3.5% | $1,142,857 |
| 40 years | 3.3% | $1,212,121 |
| 50 years | 2.9% | $1,379,310 |
The rates are Morningstar's, with data as of September 30, 2025; the portfolio column is our calculation. The same research says early retirees who accept lower odds, or who cut spending after bad years, can likely spend one or two percentage points more. For very long retirements, Karsten Jeske's Early Retirement Now series lands in a similar place, around 3.25% to 3.5%.
These figures are illustrations worked out from stated assumptions, not forecasts. Real returns vary from year to year, and taxes, fees and the order of good and bad years change the outcome. See the disclaimer.
What the 4% rule leaves out
- Fees. The Trinity study used returns before fees and taxes. A 1% yearly fee comes straight out of the return: at 3% real, 4% withdrawals last 44.1 years; at 2% they last 34.0 years.
- Taxes. Withdrawals from tax-deferred accounts are taxed, so the 4% has to cover your taxes as well as your spending.
- Flexible spending. The rule keeps spending fixed whatever markets do. Spending a little less after a bad year is what lets the higher rates in Morningstar's flexible strategies work.
- Other income. Social Security or a pension later in retirement lowers what the portfolio has to pay; see how other income lowers your FIRE number.
- Time. The research behind 4% looked at retirements of about 30 years. Someone who stops working at 40 may need the money for 50.
Questions people ask
How long will $500,000 last using the 4% rule?
The 4% rule takes $20,000 in the first year and raises it with inflation after that. With no growth after inflation the money lasts 25 years; with a steady 3% return after inflation it lasts 44.1 years, the same as $1,000,000 at 4% in the table above. The research behind the rule looked at retirements of about 30 years.
Is $4 million enough to retire at 55?
It depends on what you spend. A retirement that starts at 55 may need to last 35 to 40 years, and Morningstar's starting rates for those lengths are 3.5% and 3.3%. On $4,000,000 that means a first-year withdrawal of $132,000 to $140,000; at 4% it would be $160,000.
What is the 4% rule for withdrawals in retirement?
You withdraw 4% of your portfolio in the first year of retirement, then raise that dollar amount with inflation every year, whatever markets do. It comes from William Bengen's 1994 research and the 1998 Trinity study, which tested retirements of up to about 30 years.
Test it with your numbers
The FIRE calculator lets you change the withdrawal rate and see the FIRE number and the age you reach it move. At 3.5% instead of 4%, the calculator's example household needs $1,142,857 and gets there at 55.6 instead of 53.8.
Sources
- William P. Bengen, "Determining Withdrawal Rates Using Historical Data", Journal of Financial Planning, October 1994.
- Philip L. Cooley, Carl M. Hubbard and Daniel T. Walz, "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable", AAII Journal, February 1998 (the Trinity study).
- Amy C. Arnott, "How Much Can You Safely Withdraw If You Retire Early?", Morningstar, September 15, 2026 (data as of September 30, 2025).
- Karsten Jeske, The Safe Withdrawal Rate Series, Early Retirement Now (blog series, 2016 onward).
Last reviewed by Asier Fernández, editor, on . Educational information only, not financial advice. How we calculate