Retirement Rules of Thumb Are Mostly Wrong — Here's What to Do Instead

I have a problem with retirement rules of thumb. They're easy to remember, which is why they spread. But they're dangerously oversimplified for something as important as whether you can afford to stop working for 30 years.

The 4% rule: right idea, wrong precision

From the 1994 Trinity Study. Withdraw 4% in year one, adjust for inflation, 95% chance of not running out over 30 years. But it assumed a 50/50 portfolio and only covered 30 years. Bill Bengen, the original researcher, has since updated to 4.7%.

'Save 15% of income' — whose income?

15% of $50,000 vs 15% of $200,000 are completely different retirements. Your savings rate should depend on your target spending, not a blanket percentage.

A better way

Work backwards: estimate retirement spending, subtract Social Security/pension, multiply the gap by 25, add 20% margin. Then use a calculator to see if your current rate gets you there.

Our retirement planning calculator lets you model your specific numbers instead of relying on a rule that might not fit.