One of the biggest things investors cannot control is the financial market and economic conditions they will experience over their lifetime.

Rising stock prices and low inflation lead to big wealth gains. Bear markets and high inflation hurt portfolio performance.

Retirees dependent on portfolio withdrawals are particularly affected by market and economic conditions. A person who retired in 1968 would have only been able to sustain an inflation-adjusted 4.7% withdrawal rate over a 30-year period with a diversified portfolio of stocks and bonds. A person with the same portfolio who retired in 1989 would have enjoyed a 7.1% inflation-adjusted withdrawal rate.

The difference is the market and economic conditions they experienced. The 1968 retiree would have incurred bear markets in 1969–1970 and 1973–1974. They also would have experienced rising and very high inflation. The 1989 retiree would have benefited from a long bull market (1982–2000) with declining/modest inflation.

William “Bill” Bengen points to both examples as reasons for incorporating flexibility into a retirement withdrawal plan in his new book, “A Richer Retirement” (Wiley, 2025). The creator of the 4% rule told Cynthia McLaughlin and me that “it would be highly suspicious” if a retirement plan made it 30 years without requiring some type of adjustment.

The 4% rule calls for withdrawals taken during the first year of retirement to be equal to 4% of retirement assets. That amount (e.g., $40,000 from a $1 million portfolio) is then increased every year in response to changes in a retiree’s cost of living. Bengen raised the safe withdrawal rate—the amount that can be taken without running out of money over a 30-year period—to 4.5% in 2018. He recently raised it again to 4.7%. Both increases came after he added more asset classes to the portfolios he was testing.

Bengen, for his part, thinks we’re at the upper end of how much can be withdrawn from a portfolio with no risk of running out of money, based on what has historically occurred. He shares insights from his new analysis and updated thoughts about retirement withdrawals in this month’s issue. Additional insights from our conversation with Bengen will be shared in AAII Retirement Investing in the latter half of August.

Wishing you prosperity and good health,