Should You Still Follow the 4% Rule in 2025?
The 4% rule has been the standard for decades: withdraw 4% from your retirement portfolio each year and, with proper asset allocation, your funds should last 30 years. But with higher lifespans, market volatility, and lower bond yields, is it still safe in 2025?
THE 4% RULE
4%
Annual withdrawal for a 30-year retirement
Where Did the 4% Rule Come From?
Originally developed by Bill Bengen in the 1990s, this rule was based on historical US data. It worked—with a healthy mix of stocks and bonds—even through the Great Depression and inflation spikes.
Is the 4% Rule Still Reliable in 2025?
- Bond yields are historically low (2-3%)
- Stock markets are pricey
- Life expectancy is rising
- Big healthcare and long-term care uncertainties
Caution: Recent experts recommend adjusting to a 3.3–3.6% withdrawal for retirees in 2025, unless you’re ready to cut spending in bad markets.
Withdrawal Rate & Retirement Outcome Table
| Withdrawal Rate | Success (30 Years) | Annual Income ($1M) | Inflation Adjusted |
|---|---|---|---|
| 4.0% | 85-95% | $40,000 | Yes |
| 3.5% | 95-99% | $35,000 | Yes |
| 3.0% | 99%+ | $30,000 | Yes |
Sequence-of-Returns: The Hidden Retirement Danger
What if the market tanks right as you start withdrawals? Negative sequence returns can drain your account—even with a “safe” rate. That’s why experts now recommend dynamic strategies, especially after bad years or if withdrawals are running “ahead.”
Modern Withdrawal Tactics for 2025
- Dynamic Guardrails: Increase or lower withdrawals as portfolio value fluctuates.
- Required Minimum Distributions (RMDs): Begin at age 73 for IRAs/401(k)s—plan accordingly.
- 3-Years Buffer: Hold 2-3 years of spending in cash/short-term bonds to avoid selling during downturns.
- Social Security Delay: Each year delayed adds inflation-protected income (up to age 70).
Your Checklist for a 2025 Retirement Drawdown
- Use 3.5% as your “base” and increase if markets are strong or you retire later than 65.
- Only raise withdrawals after good years. Cut spending after bad years.
- Rebalance once a year (don’t panic sell).
- Review spending and market conditions annually.
Remember: The 4% rule is a great starting point—but flexibility, review, and modern strategies are key to 30+ years of security in 2025 and beyond.
Are you using the 4% rule or a custom withdrawal plan? Share your strategy in the comments below.
About the Author: Robert Chen is a Retirement Finance Analyst at RetireMetric.com, specializing in safe withdrawal strategies and long-horizon planning for the modern retiree.
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