On a random weekday earlier this month, a few hours of unexpected free time materialized on my calendar.
My eyes quickly darted to Bill Bengen’s new book, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, (Amazon Affiliate link), which had been sitting on my desk since its arrival on August 5th.
I snatched it up and closed my office door, fearing some unknown pressing need would encroach upon this gift of time.
By afternoon’s end, the text was devoured. To make sure I correctly interpreted his words, I set up a Zoom meeting with Bill to have a one-on-one conversation. It felt like two kindred Vulcans discussing their quest to find a logical answer to something that cannot be answered with logic.
What is this mythical quest?
The perfect withdrawal plan.
In this post, I’ll share key concepts from the book and from my talk with Bill.
Today, I review Bill Bengen’s latest book in my quest for the perfect retirement withdrawal plan. Share on X
But first, why was I so eagerly anticipating this book? Who is Bill Bengen, you may ask?
The Father of the 4% Rule
Bill is, unintentionally, the “father” of the 4% rule. It started with a research paper he published in 1994.
An MIT grad in Aeronautics and Astronautics, he worked in his family’s bottling and distribution business. After the company was sold in 1987, he shifted into financial planning.
When clients began asking how much they could safely withdraw in retirement, he discovered that finding answers proved more challenging than he imagined. Industry responses from financial colleagues were inconsistent and lacked supporting research.
His engineering mind went to work, seeking a mathematical solution to the problem.
He used historical data to test portfolio designs for SAFEMAX – the highest safe withdrawal rate for a given set of parameters. His initial analysis utilized a 50/50 portfolio of U.S. large-company stocks and intermediate-term government bonds, tested over a thirty-year time horizon.
The result?
A 4.15% SAFEMAX rate. The withdrawal rate at which, over the parameters he tested, no retiree would have run out of money. Bengen felt that the ‘.05’ decimal place implied greater precision than the research justified, so he rounded down to 4.1%. With media involvement, it became abbreviated, and the “4% rule” was born.
As Bengen himself says, it was never meant to be a law like one of Newton’s Laws of Motion — just a starting point.
What’s Changed Since 1994?
A simple two-asset class portfolio no longer reflects reality.
His latest model includes small-cap, micro-cap, international, and Treasury bills. With 55% stocks, 40% bonds, and 5% cash, his updated SAFEMAX rises to 4.7%.
But here’s the catch: that’s the worst-case retiree, the unlucky one who retired into the toughest market sequence.
His historical testing encompasses 349 retirees, each retiring one calendar quarter apart. And thus, the 4.7% rate applies to only one of the 349 – the one who experienced the worst timing of market conditions.
He emphasizes, if all retirees indiscriminately use the 4.7% SAFEMAX for their withdrawal plan, they would significantly underspend.
In fact, the average portfolio balance for all retirees (in his research) was more than five times its initial value, meaning that for most, the universally safe rate was too safe.
Valuation and Inflation
How much should recent stock market highs factor into your withdrawal rate?
Bengen’s latest book includes a section on the impact of stock valuations and inflation. Using CAPE ratios (Shiller Cyclically Adjusted Price-to-Earnings Ratio (Shiller CAPE, a measure of stock market valuation) and CPI (Consumer Price Index, a measure of inflation), he builds tables to guide starting withdrawal amounts.
(You can find these tables on his website under Charts and Tables, Chapter 2, tables 2.1 through 2.4.)
For example, if the Shiller CAPE is at 19 and the CPI is between 2.5% and 5%, that equates to a 6.95% SAFEMAX starting withdrawal rate.
If the Shiller CAPE were even higher, as it is today, would that materially lower the expected SAFEMAX for someone retiring today?
Maybe. The answer is complicated.
Bill told me that today (as of our Sept. 27, 2025, conversation), 5.5% would be his SAFEMAX, even with current market valuations.
However, he emphasized that it’s a fluid number. It can change. It’s not intended as a “set it and forget it” strategy.
He also acknowledged that as portfolio diversification expands beyond the large-cap asset class, results are not as highly correlated with metrics like the Shiller CAPE.
And he feels investors spend too much time worrying about the garden-variety bear markets when sustained high inflation is the bigger risk.
To hedge against sustained higher inflation, you must have enough equities in your portfolio to grow it sufficiently to maintain your spending power.
Perhaps that’s why his recommended allocation to equities continues to rise.
Today’s Allocation Debate
In one of Bill’s latest LinkedIn posts, he said,
“I recommend that the 55% allocation to stocks used frequently in my book be upgraded to 65% for all retirees with planning horizons of at least 20 years.”
What’s my thinking about that? Naturally, the answer is, “It depends.”
What does it depend on? Your individual financial circumstances and behavioral tendencies.
I say:
Know thyself, and thy ‘right-fit’ portfolio shall reveal itself unto you.
For example, if you are delaying Social Security and relying entirely on your portfolio for early spending needs — and you feel anxious about market risk — starting with a more conservative stance, perhaps 55% equities, may make more sense. If all goes well, your equity allocation can float up over time.
Bengen discusses this approach, called the “rising equity glidepath,” favorably in his book.
What the 4% Rule Misses
When it comes to taxes, percentage calculations are gross withdrawals. They do not represent spendable income. You’ll have to assess taxes and how much of that gross withdrawal is available to spend.
Taxes are one of several factors I cover in my free report, Four Things Near Retirees Must Know About the 4% Rule, where I discuss several items not covered in the traditional 4% rule approach.
The bottom line – while we all want certainty and a neat mathematical formula to follow, life doesn’t work that way. You need a fluid and dynamic process. Not a rule.
The Most Important Factor
Bill summed it up succinctly,
“Have a plan so you don’t run out.”
Not a rule. Not a percentage. Instead, a structured process.
The process itself is what matters most — deciding on your structure, monitoring, measuring, and adjusting consistently. The output of this process allows your withdrawals to adjust dynamically.
How often do you monitor and adjust?
Bill and I are in sync on this; annual reviews are sufficient. Measuring at random highs or lows may lead you off course.
My preference is updating plans annually based on year-end values. If your software or measuring process updates based on real-time values, you may get a warped view.
For example:
If measuring near market peaks, it may lead you to withdraw too much.
If reassessing near market bottoms, it may lead you to withdraw too little.
Managing Risk
Both Bill and I were practicing advisors during the Great Recession. We remember the fear.
In his words, “It’s hard to imagine something worse than that. I was plain scared”.
So was I.
It’s easy to forget that feeling in today’s high markets.
That’s why having a third party to help manage risk is so valuable — to temper overconfidence in bull markets and fear in bear markets.
Who do you turn to help remain objective about your decisions?
This applies to advisors, too. I am forever grateful for a team of colleagues, as we keep each other grounded in our thinking.
Like me, Bill favors remaining 100% equities during the accumulation phase, but advises adjusting to a more conservative position as retirement approaches.
When asked about the magnitude and timing of such adjustments, he said it depends on market conditions. And added that in today’s market, he’d lean toward a sharper reduction in equities for those nearing retirement.
Connecting Cash Flow to Allocation
To connect cash flow needs to your portfolio allocation and withdrawal rate, you need a process.
In Fritz’s last post, 3 Questions That Determine 99% of Your Retirement Success, he begins with “Do You Have a Reliable Cash Flow Plan?”.
Your cash flow plan is the starting place for connecting your portfolio to your life. I break it into four parts.
Start with an income timeline — a map of all incoming cash flows that do not come from your portfolio assets. This includes items such as Social Security, pensions, annuity income, deferred compensation payouts with a set schedule, and rental income.
Next comes an expense timeline. Expenses are rarely linear. Some years may include more travel, a new car, or funding a wedding. Other years may not have such large outflows.
Then, you calculate the gap, which is the difference between your income and expense timelines. This gap illustrates the year-by-year amount needed from savings and investments.
Finally, you solve for a tax-managed way to cover that gap, dependent on what account types you have.
This type of process maps your withdrawals down to the account level.
Show me what someone needs to withdraw from which account in which year, and I can recommend a starting allocation.
And while I can calculate the withdrawal rate too, I don’t find the annual withdrawal rate matters so much as long as the lifetime withdrawals result in a reasonable “fundedness” level.
Fundedness is a measure that pension plans use, comparing plan assets to the future cash flows to be delivered. This metric can be applied to a household’s balance sheet just as well as to a pension plan.
I find this process so fundamental that I am befuddled by how someone would come up with a starting allocation or withdrawal rate without first mapping cash flows.
Final Thoughts
Bill’s process leads him to comfortably conclude that a 5.5% gross withdrawal rate is reasonable today – but only as a starting point. It’s not a forever number to follow.
With my preferred process of mapping cash flows and connecting the financial plan to the portfolio, a household’s safe withdrawal rate for the year could be in excess of 10% or below 4%.
But following my process, Fritz’s process, or Bengen’s process isn’t as crucial as making sure you have a process to follow. As for the answer to the article of today’s post (“What’s more important than a Safe Withdrawal Rate?”), I hope the answer is now clear:
Regardless of which withdrawal rate you use in your retirement, the more important question is what process will you establish to keep your spending on track throughout your retirement?
And that, I believe, is the key. Whatever you use – stick by it.
It reminds me a bit of James Clear’s acclaimed book Atomic Habits (Amazon Affiliate link). You need “atomic habits” that you apply to your retirement process.
What about you? If you are nearing retirement, or already retired, what process do you use to determine how much you can safely withdraw? And how often do you measure and reassess? We welcome your thoughts below so we can all learn from one another.
