Ready For Retirement — Episode Summary

Episode Title: You Could Spend WAY More Than the 4% Rule Suggests (Says the Man Who Created It)
Host: James Conole, CFP®
Guest: Bill Bengen (Originator of the 4% Rule)
Release Date: September 20, 2025

Episode Overview

In this episode, host James Conole interviews Bill Bengen, the original creator of the "4% rule" fundamental to retirement planning. The conversation covers the history and context of the 4% rule, recent research that suggests higher sustainable withdrawal rates, and how retirees can optimize their income by tweaking portfolio diversification and considering market conditions. Bengen discusses how new data and analysis point to a safe withdrawal rate potentially as high as 4.7% — and possibly even higher depending on inflation and market valuations.

Key Discussion Points & Insights

1. The Origins and Context of the 4% Rule

• Pre-1994 Landscape:

  • Retirement withdrawal strategies lacked scientific research; most advisors guessed or relied on ad hoc approaches.
  • Bengen initiated his own research in response to clients’ persistent questions about retirement spending.

    "I saw more and more clients asking me the same questions... I was desperate. That's why I decided to go ahead and find out for myself." (Bill Bengen, 02:15)

• Context of the 4% Rule:

  • Designed around the worst historical scenario: a retiree in October 1968, two back-to-back bear markets, and 10 years of high inflation.

  • The 4% rule aimed to ensure even the "unluckiest" retirees wouldn't outlive assets.

    "What I was trying to identify... was the one retiree who historically had the worst experience... That was a terrible time. Just devastated portfolios." (Bill Bengen, 03:18)

2. Understanding Portfolio Allocations

• Safe Withdrawal Rates Aren’t Linear:

  • Bengen’s research showed a “mesa” or plateau effect for stocks in a 45–75% range — too much or too little stock exposure reduces safe withdrawal rates.

    "The more stocks the better. Turns out it's more like a mesa... between like 45 and 75% stocks, where you essentially get the same withdrawal rate..." (Bill Bengen, 05:28, 05:40)

• Asset Class Evolution:

  • Early research used only large cap US stocks and intermediate-term government bonds for simplicity and due to data limitations.

  • More recent research incorporates seven asset classes: adding micro caps, small caps, international stocks, and Treasury bills increases both diversification and sustainable withdrawal rates.

    "Now I'm up to seven [asset classes] from the original two in the portfolio... and that bumps the worst case number up to 4.7%." (Bill Bengen, 07:26)

3. Higher Safe Withdrawal Rates & What Drives Them

• 4% is Not a Limit for Most Retirees:

  • Historical average “safe” withdrawal rates are over 7%; 4% is a worst-case protective figure.

  • Diversification, inflation environment, and stock valuations are the biggest levers for adjusting withdrawal rates.

    "The average for all retirees has been 7%... So getting 4.7, pretty meager compared to that." (Bill Bengen, 07:26)

• Real-World Example:

  • Retiring after the 2008–09 financial crisis could support withdrawal rates as high as 8% due to depressed valuations and lower inflation.

    "If you remember, at the end of the great financial crisis in April of 2009, I calculate they'll probably be successful with an 8% withdrawal rate." (Bill Bengen, 11:18)

4. Inflation and Market Valuation as Critical Variables

• Two Key Factors:

  • Estimating inflation for the first 10 years of retirement is crucial.

  • Stock market valuation at the point of retirement matters: high valuations often precede bear markets.

    "If you have cheap stocks and you have low inflation, you're in nirvana. If you have the opposite, you're in trouble." (Bill Bengen, 10:31)

5. Practical Application and Common Misunderstandings

• Misinterpretation of the Rule:

  • Many assume the 4% rule means withdrawing 4% of the current portfolio each year, but it's actually an inflation-adjusted dollar amount based on the original balance.

    "People hear 4% rule, I think, take 4% of your portfolio value every year. That's not how that system works... the first year you apply the percentage and then after that you throw the percentage away and just give yourself a cost of living adjustment..." (Bill Bengen, 17:11)

• Customizing for Each Retiree:

  • Each retirement plan must account for individual circumstances, income sources, and spending patterns.

  • Flexibility is key: combining research with personal needs gives the best results.

    "Every client is different... you have to treat each case separately and develop a plan based on what you see before you." (Bill Bengen, 16:43)

• Dynamic Adjustments:

  • Ongoing plan management is essential. Market declines may not require changes, but persistent inflation does.

    "If it's a stock market decline, you probably don't have to do anything. But if inflation rears its ugly head again, you need to get worried and start taking measures immediately to protect your portfolio." (Bill Bengen, 19:51)

6. Bill Bengen’s Latest Research Directions

• Investigating Rising Equity Glidepath:

  • Research suggests that increasing equity exposure during retirement boosts withdrawal rates, though the mechanism needs further study.

    "When I tested it against all my retirees, they all had a bump to their [withdrawal] rate... Don't fully understand why that works." (Bill Bengen, 14:01)

• Making Research Accessible:

  • Bengen avoids overly complex models, focusing on empirical evidence so retirees and advisors can readily apply findings.
  • His new book, A Richer Retirement, lays out both big-picture process and detailed application for sustainable withdrawals.

Notable Quotes & Moments

• On the outdated nature of 4%:

  "Naturally if today I'd be recommending higher withdrawal rates than that to anybody retiring today." (Bill Bengen, 04:41)

• On process vs “the number”:

  "Planning for your retirement draws is a process... the first step is not to find a number... but to identify all the personal factors... then you come up with a number finally." (Bill Bengen, 18:46)

• On biggest challenges ahead:

  "I would like to understand a little bit more about that rising equity guide path system... I would like to explore that in a lot of different scenarios..." (Bill Bengen, 14:01)

Timestamps for Major Segments

• [00:00] – Introduction and history of the 4% rule
• [03:18] – The 1968 retiree: origin of “worst case” scenario
• [05:28] – Mesa-shaped withdrawal rates and portfolio allocation
• [07:26] – New asset classes push safe rate up to 4.7%
• [09:19] – Breakthrough on integrating inflation and market valuation
• [11:18] – Example: 8% safe withdrawal post-Great Recession
• [13:11] – Current research avenues and industry questions
• [15:06] – Research limitations and making findings practical
• [16:38] – Customization and spending patterns in retirement
• [17:11] – The most common misunderstanding of the 4% rule
• [18:46] – Purpose and message of A Richer Retirement
• [19:51] – Managing plans in retirement: market vs. inflation response

Final Thoughts and Resources

Bengen urges retirees and advisors to move beyond the simple 4% rule, incorporating diversification, inflation expectations, and market valuations into individualized, ongoing plans. His new book, A Richer Retirement, provides practical processes to help retirees maximize both income and peace of mind.

• Book: A Richer Retirement – available on Amazon, Barnes & Noble, Powell’s, and other booksellers.
• Key Takeaway: The sustainable retirement withdrawal rate is higher and more dynamic than the outdated 4% rule, but thoughtful, flexible planning is essential.
• Action: Pay attention to inflation in retirement, not just market declines; revisit your plan regularly and adjust as needed.

For more details, see the episode’s show notes or visit Bill Bengen’s book listings online.