By Aliss Higham

Copyright newsweek

For nearly three decades, one of the most widely cited guidelines in retirement planning has been the “4 percent rule.” Originally devised in the mid-1990s by financial adviser Bill Bengen, the rule suggested retirees could safely withdraw 4 percent of their portfolio in the first year of retirement and then continue withdrawing the same amount, adjusted for inflation, each year after.The appeal was its simplicity: in year one, take 4.15 percent of your savings, then repeat with adjustments. The strategy was stress-tested against historical market downturns and became a reliable benchmark for retirees looking to stretch savings across three decades.Now, Bengen has revisited his calculations. In his new book, A Richer Retirement: Supercharging the 4 Percent Rule to Spend More and Enjoy More, he presents an updated “4.7 percent rule.”Speaking on The Marriage Kids and Money Podcast with host Andy Hill, Bengen said in August: “That 4.15 percent is now up to 4.7 percent, and you can tweak that a little bit without taking any additional risk and get it up to 5 percent. So I guess you could say the 4 percent rule is the 5 percent rule.”Balancing Risk and RewardPam Krueger, founder and CEO at Wealthramp, cautioned that such rules should serve only as flexible guidelines.”These are rules of thumb for a reason. It’s up to you, the owner of your own life savings to either calibrate and build in the adjustments you need to make as circumstances change and evolve,” she told Newsweek.Krueger outlined the trade-offs. For a retiree with $1 million saved, the traditional 4 percent rule yields $40,000 annually. Increasing to 4.7 percent raises that to $47,000—a relatively modest $7,000 difference, but one that can significantly affect portfolio longevity.”If the market turns against you early on, that extra spending could mean your savings run out in 24 to 26 years instead of 30,” she said.She also stressed the importance of aligning money with life goals. In one client example, a couple chose to strictly adhere to the 4 percent rule despite being able to afford more.”That extra $7,000 each year could have paid for a couple of bucket-list trips they kept putting off: visiting their granddaughter in Europe, or the national parks tour they always dreamed about. Fast-forward 20 years: their portfolio is still strong, but their health isn’t. They look back and realize they played it too safe. They could have afforded those experiences earlier, but they were too frugal and missed out,” she said.Her takeaway: “Sometimes it’s not about protecting every penny—it’s about matching your spending to your life goals. Being too cautious can cost you just as much joy as overspending ever could.”The Investment PictureGil Baumgarten, CEO of Segment Wealth Management, told Newsweek that withdrawal rules cannot be separated from investment strategies.”The 4 percent rule operates under certain assumptions that must be carefully considered. One of the fundamental factors influencing the sustainability of this withdrawal rate is the manner in which retirement funds are invested. Many retirees may find their investments yielding barely the 4 percent mark, particularly in low-interest-rate environments,” Baumgarten said.He warned that conservative portfolios, such as those heavily invested in certificates of deposits (CDs) earning just 2–3 percent, face particular strain. “If withdrawals are set at 4.7 percent, there is a significant risk of exhausting funds within a 25 to 30-year timeframe, especially when accounting for inflation,” he said.Baumgarten also said that retirement planning often extends beyond the retiree’s own needs.”Many couples are concerned about leaving a financial legacy for their children. This focus can inadvertently impact their spending and withdrawal strategies. How much guidance should parents provide in balancing their retirement needs with their children’s financial ambitions? It’s a delicate balance that requires thoughtful planning,” he said.Still, he acknowledged that under the right conditions, Bengen’s updated framework may work. “When retirees have a well-balanced portfolio of stocks and bonds and an understanding of market fluctuations, a higher distribution rate may be a feasible option. This is particularly true for clients retiring in their late 60s, with a financial cushion that allows for the additional risks associated with higher withdrawals,” he said.Not One-Size-Fits-AllExperts agree the new 4.7 percent rule provides a useful starting point, but individual factors—investment choices, health, longevity, family priorities—ultimately determine how much retirees can sustainably withdraw.As Baumgarten puts it: “Ultimately, retirement distribution rules are not one-size-fits-all. The 4 percent and 4.7 percent guidelines provide a framework, but individual circumstances… must shape these decisions.”