The 4% rule still sort of works, and here's when it doesn't

Where the rule came from

In 1998 a trio of finance professors looked at over 70 years of US market and inflation data. They asked a simple question: if you retire with $1 million and take out $40,000 in year one, bumping it up each year for inflation, do you run out of money within 30 years?

Answer, for roughly 95% of historical start dates: no. That became the 4% rule.

What people actually do with it

They do the math in their head. Need $50,000 a year in retirement? Then $50,000 × 25 = $1.25 million. That's the flip side of the rule, usually called the 25x rule, and it's a genuinely useful shortcut. Our Retirement Number (25x) Calculator does that exact math in two seconds.

But then real life shows up.

Where it bends

Three things break the rule's assumptions, in order of how often people miss them:

1. The 30-year horizon. The data was 30 years. Retire at 55 and you might need 40. Withdraw 4% over 40 years and your odds drop. Not to zero, but noticeably.

2. Sequence of returns. When the bad years hit at the start, they hurt way more than when they hit later. Two people can earn the exact same average return over 30 years and get wildly different outcomes just based on the order. This is the thing a simple calculator can't show you, and why running a simulation is worth your time.

3. A flat 4% withdrawal ignores markets. If the market tanks in year two, keep withdrawing 4% plus inflation and you're eating your principal. A flexible withdrawal strategy, cutting a few percent in bad years, stretches the money a lot further.

The number that actually stunned me

At 7% average return with 12% volatility, a 40-year retirement, and a 4% starting withdrawal, the simulation I ran gave somewhere around 75% survival. That's not the 95% you hear quoted. It's not terrible, but it's not a retirement you should treat as certain either.

Drop the withdrawal to 3.5% and survival jumps into the 90s. That half a percent is the most expensive difference in all of retirement planning.

Why we'll never agree on a single number

Because your age, your spending, your health, and the market all move together in ways that can't be reduced to one rate. I'd rather show you 10,000 possible futures than one confident line. The simulator here does that, and it's free and runs in your browser, which struck me as the right combo: thorough enough to think about, private enough to actually use.