Close this search box.

Ignore The 4% Rule – It Isn’t That Helpful.


You’ve probably heard of the 4% rule. For decades it’s been used as a way for investors to figure out how much income they can expect from their portfolios in retirement.

But it may not be as helpful as you’ve been led to believe. 

Here’s why. 

What is the 4% Rule?

It’s a rule of thumb for how much money you can sustainably withdraw from your portfolio in retirement.

In 1994, William Bengen reviewed historical inflation rates and the returns of stocks and bonds. He determined that for a 30-year time horizon, if an investor withdrew 4% of their portfolio at the beginning and then increased it with inflation, they would be unlikely to run out of money. Bengen later referred to this figure as “SAFEMAX” – the maximum percentage an investor could safely withdraw.

In 1998, a study from Trinity University mostly corroborated the findings.

The rule has taken on a life of its own. It is often touted as law, and many aspiring retirees turn to it for unassailable guidance on how much money to withdraw when they retire. 

The studies were interesting. But are the findings useful? Should retirees use the 4% rule for retirement planning?

I’d suggest not..

The Problems With The 4% Rule


A Moving Target

Since being published, Bengen has updated his rule numerous times. Most recently, he suggested 5% was fine, and 4.5% would be a worst-case scenario. Then it became 4.7%, and then 4.4%. I’m not sure what it is today, but it’s clear that the rule is malleable, and he changes it based on recent market conditions. 

If you’re a long way from retirement, the number will most certainly be different by the time you get there.


Will History Repeat?

The problem with using historical data and projecting it into the future is that it assumes history will repeat. Stock markets are a relatively new invention in the history of humankind. One hundred years is a blip in the grand scheme of things. We don’t have multiple universes of data to draw from, only that produced by us Earthlings. 

The future is certainly going to look different from the past, and who knows that that means for markets. 


Your Specific Portfolio Matters

The studies examined multiple portfolio allocations, withdrawal rates, and retirement horizons. But the 4% rule comes from a portfolio consisting of 50% Large-Cap US stocks, and 50% US government bonds. It assumed that investors continually rebalanced, meaning they never deviated from this asset mix. 

Most investors are unlikely to hold the exact same portfolio for 30 years and remain perfectly balanced at all times.

Even Bengen himself doesn’t advocate for holding the same portfolio over time. He recently suggested investors move half of their portfolio to cash. This is questionable advice, as market timing is a function of luck more than skill. But that’s a topic for another post. Iit’s clear the rule is based on a set of assumptions that even the author doesn’t adhere to. 

As for your own risk tolerance and capacity, 50% in stocks might be too high, and it might be too low. The study did review different portfolio allocations, which led to different conclusions. Namely, lower stock allocations led to lower sustainable withdrawal rates. 


What About Canadians?

Canadian investors should be holding a globally diversified portfolio. 

But the study is based only on US markets, in US dollars. Even if you held 100% of your portfolio in US assets (you shouldn’t), you’re likely going to convert it to Canadian dollars when you spend it. That adds currency risk – the performance of the US dollar will directly impact your portfolio returns, and your safe withdrawal rate. It could benefit you – it could not. Nobody knows. 

In a 2017 study, Morningstar Canada looked at historical safe withdrawal rates for 20 different developed countries. Assuming a portfolio of 50% domestic stocks and 50% domestic bonds, the safe withdrawal rate with a 95% success rate varied significantly across countries.

In Japan, it was 0.20%. In the UK, it was 2.80%. The 20-country average, including the US, was only 2.30%.

Historically, the variability of international returns played a significant role in safe withdrawal rates.  

This alone should be enough to discard the 4% rule. But if you’re not convinced, read on – I’m not done yet.


You Are Not Average

While averages can be helpful, you are not the average. You are a data point that contributes to the average, meaning your experience will certainly be above or below that average.

In the data, there were periods where a 4% withdrawal rate meant you would have run out of money. Those individuals likely don’t care that their withdrawal was safe ‘on average’.

Your personal expenses are yours, not the average. In retirement, spending will be volatile – nobody spends the same amount of money each year for 30 years. Some years, 4% may be too much, and in some years, too little. People’s spending often declines as they age, and unexpected events can require larger than normal withdrawals. 

Your spending should respond to your portfolio performance, not the other way around. 


How Long Is Your Retirement?

The study did look at shorter and longer time frames, though the 4% rule was derived from a 30-year time-horizon. With many investors these days aiming for FIRE (Financial Independence, Retire Early), and increasing lifespans, you may be looking at a withdrawal period of more than 30 years. 

Granted, it might be less than 30 years. In which case a higher withdrawal rate will be sustainable. 

But you won’t know that until it’s too late anyways.


Who Withdraws Their Income Once Per Year?

This likely wouldn’t have had a major impact on the results, but it’s worth pointing out that the study assumed a single withdrawal at the end of the year. Most retirees need income monthly, so the annual withdrawals modeled don’t correlate without how you would actually spend your money. 

For example, look at the market drawdown as a result of the Coronavirus in 2020. For the calendar year, the S&P500 finished up over 25%. But from February to March, it dropped more than 30%, and took until August 2020 to recover. Retirees drawing income monthly would have pulled out nearly half of the year’s retirement income while the market was down, leaving less capital in the portfolio to participate in the eventual recovery.


What About Taxes?

There were no taxes considered in the study. But most Canadians will have RRSPs and TFSAs, with the former likely to represent a larger base of retirement assets. 

Assuming a 30% marginal tax bracket, a 4% RRSP withdrawal leaves you with 2.8% of the RRSP balance to spend after taxes. On a $1,000,000 portfolio, that’s a $12,000 difference per year –- $1,000 per month. The same investor funding their retirement entirely with TFSAs would have a very different outcome.

For most, it will be a combination of taxable and tax-free retirement income. So, the 4% tells you nothing about how much you can actually spend in retirement, which is the number that really matters.


What You Should Do Instead – Be Flexible

Withdrawing 4% of your portfolio each year, adjusted for inflation, might be too much – it might even be too little. 

Flexible retirement spending strategies can help you overcome the shortfalls of the 4% rule. Cutting your spending in response to changes in the markets, inflation, tax regimes etc. provides defense if you get unlucky with inflation or portfolio returns. There are a few well- documented strategies in this arena, which I will write about in a separate post.


If you must use the 4% as a guideline, use it sparsely, and understand its shortcomings. While it’s better to have a target to aim at than no target at all, your target should be yours, based on your own unique circumstances. 

None of this is meant to be a knock on William Bengen, or the Trinity Study. And in complete fairness, Bengen didn’t name it the 4% rule – it took on that name later on. It was interesting work, especially at the time, and it contributes to our understanding of retirement planning. My concern is that uneducated investors are adhering to it without understanding its pitfalls. 


So, strike the 4% rule from your memory. Or at least, call it the 4% theory.


The information contained herein has been provided for information purposes only.  The information has been drawn from sources believed to be reliable.  The information does not provide financial, legal, tax or investment advice.  Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance.  This does not constitute a recommendation or solicitation to buy or sell securities of any kind.  Wellington-Altus Private Wealth Inc. (WAPW) does not guarantee the accuracy or completeness of the information contained herein, nor does WAPW assume any liability for any loss that may result from the reliance by any person upon any such information or opinions.  Before acting on any of the above, please contact your financial advisor.  WAPW is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.  


The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.

Amy Sweeney



Amy was born and raised in Squamish, is David’s oldest daughter and now the newest member of the Sweeney Bride team. Many may recognize her as she has worked periodically for the team for over 20 years. For the past five years, she has gained administrative experience and more running her own business as a Kinesiologist after completing a bachelor’s degree in Kinesiology at the University of British Columbia in 2016. Now, Amy is officially ready to join the finance industry. Currently residing in North Vancouver, Amy spends all her “free” time raising Dave’s two wonderful grandchildren.
Liam Hill


Associate Investment Advisor

Originally from Sydney, Australia, Liam moved to the Sea to Sky region in 2013, leaving the beaches behind to embrace the mountains. He hasn’t looked back since and enjoys exploring the wilderness by both land and sea.

Liam’s unique strength lies in his capacity to adapt and fine-tune strategies to match the ever-changing financial world. He’s a passionate advocate for adaptability and flexibility, believing these traits are crucial for securing financial well-being.

Liam holds the Canadian Securities Course qualification and is currently pursuing the Chartered Investment Manager (CIM) designation.

He shares his industry knowledge and business skills to empower individuals, families, and businesses on their path to financial success.

Liam is committed to educating our clients about the financial services industry and helping them make the most of available resources to achieve prosperity.


Administrative Assistant

Sharon worked for Sweeney Bride from 2014 to 2016 and recently rejoined the team as an Administrative Assistant in 2021. She has years of administrative experience in a variety of industries including working in legal and accounting firms. She enjoys being detailed, organized and efficient. When not hard at work, she enjoys exploring the great outdoors with her dogs, playing co-operative strategy board games and relaxing while sipping a nice Craft beer.

Carrie Freitag


Administrative Assistant

Carrie is the newest member of our team and is our Administrative Assistant. She has previous industry and administrative experience and her fascination with the finance industry is rapidly growing. Carrie moved to BC in 1994 from Ontario and never looked back. While not working she loves hanging out with her two kids, awesome cat Leo, and enjoys a competitive game of 21, and her gardens.

Katie Norton



Katie is a Business Administration graduate who joined the Sweeney Bride team in 2016. She takes care of on-boarding as well as managing account administration for our existing clients. She works hard to ensure the clients feel supported throughout the on-boarding process and is always available to answer questions.

A BC resident since 1997, Katie and her husband moved to Squamish to raise their two girls. They enjoy all of the outdoor activities and natural beauty that Squamish has to offer.

Liz Woodsworth


Office Manager

Liz joined the Sweeney Bride team in 2015 as office manager. She is the gatekeeper in the office and is the face that greets you as you come through the door. If she can’t help you, she will ensure you speak with someone who can. Liz is a long-time Squamish local; when not in the office she spends her days soaking up all that this town has to offer while chasing her two active boys. Liz brings her valuable organizational skills and enthusiastic attitude to the team. 

Janet Bride


CFP®, CIM® | Senior Wealth Advisor

Janet Bride is a Senior Wealth Advisor at Wellington-Altus Private Wealth and co-founder of the Sweeney Bride Strategic Wealth Advisory team.

With over 15 years’ experience in the Industry Janet holds the Chartered Investment Manager (CIM®), CERTIFIED FINANCIAL PLANNER®, and Elder Planning Counselor (EPC) designations and is also Insurance licensed.

Janet grew up in Ontario and moved out to beautiful British Columbia in 1995 with her husband, Paul, who is an adventure travel photographer. Her passion is to travel the world. Always interested in exploring different cultures and landscapes, she is grateful to have traveled to over 50 countries across 6 continents. She also enjoys continuous learning, spontaneous adventures with family and friends, and an active lifestyle in the Sea to Sky. Janet is proud to be a Big Brothers Big Sisters Alumni member since 2004.

She is highly motivated by helping people reach their financial dreams by creating comprehensive financial plans for individuals & families. While using a holistic approach to wealth management, she specializes in tax strategies and her goal is to encourage savings and help build our client’s wealth for a healthy and prosperous future.



CFP®, CIM® | Senior Wealth Advisor

Dave Sweeney is a Senior Wealth Advisor at Wellington-Altus Private Wealth and co-founder of the Sweeney Bride Strategic Wealth Advisory team.

With over 31 years’ experience in the Industry Dave holds the Chartered Investment Manager (CIM®), CERTIFIED FINANCIAL PLANNER®, and Elder Planning Counselor (EPC) designations and is also Insurance licensed.

Dave has lived in Squamish for most of his life. Married to his wife Donna, since 1987, they proudly have 3 lovely daughters, Amy, Danielle and Jamie. With his time in Squamish, it has allowed him an opportunity to become involved in many valuable groups.

Dave is a retired Captain of Squamish Fire Rescue after 35 years of service. Another passion was sports and he has been a coach for Squamish Youth Soccer Association where he dedicated 10 years to coaching girls Rep teams. Additionally, he is a former member and Treasurer of the Sea to Sky Community Services Board. Dave is a frequent contributor to Mountain FM’s Mountain Monitor, providing general advice and financial commentary.

Dave continues his volunteer work as Treasurer for both the Squamish Hospital Foundation and the Squamish Downtown Business Improvement Association. He is also a sitting Board member of the Squamish Community Foundation.

Professionally, Dave started his Financial Planning practice in 1994. After living through both his parents’ demise and witnessing what a lack of understanding they had, he realized what sound planning techniques could do to ensure that an untimely death did not destroy one’s lifetime work. For over 20 years, he has made it his passion to assist others in not facing the same plight.