Why the 4% Retirement Withdrawal Rule is Out-of-Date (And How to Better Advise Your Clients)

Greg DuPont
Aug 13
2 min read

There’s a piece of conventional wisdom that just won’t die: the so-called “4% rule.”

For years, financial advisors and talking heads have told retirees, “Just withdraw 4% of your portfolio each year and you’ll never run out of money.” But as Greg DuPont, Certified Financial Planner, explains in Episode 50 of the March to a Million podcast, that rule of thumb is not a plan — and relying on it without deeper thinking is one of the fastest ways to end up in a retirement nightmare.

🔒 WHERE THE 4% RULE CAME FROM (AND WHY IT’S OUTDATED)

The 4% rule dates back to a study from the 1990s by Bill Bengen, who tested withdrawal rates against historical market returns to find a “safe” number. His conclusion: if you start retirement with a balanced portfolio and only withdraw 4% annually, you should be okay for 30 years.

But that was then. Today’s retirees face an entirely different economic reality:

Lower projected returns
Higher volatility
Rising lifespans
Tax drag
And unpredictable inflation

In fact, in the aftermath of the 2008 financial crisis, Morningstar’s revised models suggested a safe withdrawal rate as low as 2.8%. More recently, it’s ticked back up to 3.7% depending on assumptions. Still, none of this is individualized, and none of it accounts for taxes or advisor fees.

And don't forget:

“If you’re paying a 1% advisory fee, your 4% rule is really a 3% rule. And that’s before taxes.” — Greg DuPont

⚠️ THE DANGER OF OVER-SIMPLIFYING RETIREMENT

The biggest issue? People treat the 4% rule like a strategy when it’s really just a benchmark. They plan their future around a number, rather than designing a system that:

Coordinates with their Social Security timing
Accounts for medical costs later in life
Adapts to market swings
Prioritizes guaranteed income for essentials

And most importantly: a real plan should reflect your clients' lifestyle, risk tolerance, and goals. Not just a math formula.

⚖️ PRIORITIZE FINANCIAL STRATEGIES, NOT SLOGANS

We've built out a complete white paper on this topic, including:

The evolution of the 4% rule and its assumptions
Key withdrawal strategies (guardrails, buckets, annuities, variable spending)

Instead of defaulting to 4%, ask your clients this question:

What do you actually need your money to do?

From there, attorney advisors can walk clients through a series of strategies that separate needs from wants, anchor essentials to guaranteed income, and allow flexibility in how the rest is invested.