Retirement Withdrawal Rule Rethought as 4% Gives Way to 5%

The 4% retirement withdrawal rule is getting a serious challenge. David Blanchett of PGIM published a paper titled "Rethinking Safe Initial Withdrawal Rates." He found the safe rate depends on how much of a portfolio must cover essential expenses. For a 30-year retirement where the portfolio covers all essentials, the safe rate is 4.4%. Moderate flexibility pushes it to 4.9%. High flexibility lifts it to 5.6%.

Robert Brokamp, a certified financial planner and host of Motley Fool's Hidden Gems Investing, said the rule has shifted. "I think 4% probably should start at 5% for most people, and then you can adjust for your circumstances," he said in a podcast recorded July 4, 2026. He also pointed to Bill Bengen, the rule's originator, who now advocates 4.7% as the worst case and would choose 5.5% for a retirement starting today.

The discussion came during a broader retirement planning episode with fellow planner Stephanie Marini. They covered common rules of thumb, age-based savings guidelines, retirement calculators, and when to hire a professional.

The 50/30/20 Rule

Marini highlighted the 50/30/20 budget framework. Under it, 50% of income goes to needs, 30% to wants, and 20% to savings. "I like this one because for 80% to be going toward needs and wants feels like a really manageable percentage for most people," she said. The guideline helps fight lifestyle creep. When income rises, the savings percentage rises with it.

She warned it is a general tool. "For those people living in Sacramento, New York, of those high-cost-of-living areas, 50% might not be enough when rent is so high," Marini said. Someone who plans to support extended family in retirement may need more than 20% saved.

Brokamp added that Buck Hartzell, a Motley Fool colleague who recently retired, used to tell interns: "Save until it hurts." Brokamp's own rule of thumb is 15% of income saved for retirement, including any employer match. A 5% match from an employer means the worker needs to put in only 10% to hit that target.

Age-Based Savings Milestones

Fidelity and T. Rowe Price each publish age-based savings targets. Fidelity's guideline calls for one times income saved by age 30, three times by 40, six times by 50, eight times by 60, and ten times at retirement. T. Rowe Price's numbers start lower: 0.5 times by 30, two times by 40, five times by 50, nine times by 60, and 11 times at retirement. The difference reflects assumptions – Fidelity targets retirement at 67, while T. Rowe Price assumes 65.

Marini said she finds such milestones of limited use. "It doesn't take into account earnings years and the different earnings rates," she said. She warned against dollar-based targets popular on social media, like "$150,000 saved by 30," because they ignore income variation.

Brokamp noted that the value lies in the full reports behind the guidelines. T. Rowe Price provides a range at each age based on income level. Higher earners get less from Social Security, so they need to save more. Single people also need to save more, both because they receive only one Social Security check and because they miss the economies of scale of a married household. He recommended JPMorgan Chase's guide to retirement as another resource.

Retirement Calculator Assumptions

Online calculators let users plug in their own savings rate, retirement age, and Social Security expectations. Brokamp's preferred free tool is CalcXML's Retirement Planning Module. Premium options include Boldin, MaxiFi, and ProjectionLab. (Motley Fool Ventures, a sister company of The Motley Fool, has an investment in Boldin.)

Marini suggested starting with the calculator built into an employer's 401(k) provider. "The big ones, especially Vanguard, Schwab, Fidelity, they'll all have a projection model built into their software," she said. She has been using ProjectionLab's free version to model scenarios like retiring five years earlier or switching to part-time work.

Both planners warned about default assumptions. Many calculators assume 8% to 10% annual returns. Brokamp and Marini each use 6% pre-retirement and 5% in retirement. "The U.S. stock market is about as expensive as it's ever been," Brokamp said. Starting at high valuations tends to produce below-average returns over the next decade. Inflation assumptions also matter, especially for medical expenses, which have historically risen faster than overall inflation.

When to Hire a Professional

Even do-it-yourself investors should get a professional second opinion every five to ten years, Brokamp said. A planner can help with the emotional side of retirement, tax strategy, and asset allocation. "The mindset that a financial professional can help walk you through those more qualitative questions and emotional journey is not something that AI or calculators have been able to replace," Marini said.

Hourly planners charge $250 to $500 an hour. Project-based fees range from $2,000 to $5,000 or more. Advisors who manage money typically charge around 1% of assets annually.

Networks for finding planners who work hourly or by project include the Advice-Only Network, Garrett Planning Network, NAPFA, and XY Planning Network. Some employers offer financial wellness programs or access to counselors through their 401(k) provider.

T. Rowe Price Group Inc., which publishes the age-based guidelines discussed, has an Alpha Score of 81, labeled Strong. See the TROW stock page for details. JPMorgan Chase, which publishes the retirement guide Brokamp recommended, has an Alpha Score of 56, labeled Moderate. The JPM stock page is available for further analysis.

Financial independence means different things to different people, Marini said. "It's so much more than just a dollar amount saved. It's more about the options that it provides," she said. That could mean keeping expenses low, saving enough to support parents, or taking breaks from a corporate career.

Brokamp's closing advice: Determine what financial independence means to you, then align your finances to get there. The podcast episode was recorded on July 4, 2026.