The Main Reason I Refuse to Use the 4% Rule for My Retirement Savings
- - The Main Reason I Refuse to Use the 4% Rule for My Retirement Savings
Maurie Backman, The Motley FoolDecember 22, 2025 at 8:56 AM
0
Key Points -
The 4% rule is a popular option for managing retirement savings.
I find the rule too restrictive.
I'd rather adjust my withdrawal rate from year to year based on market conditions and my personal spending needs.
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As someone who writes about Social Security regularly, trust me when I say I know how important it is to save well for retirement. And to be clear, that isn't because Social Security is going away.
Rather, I know those monthly benefits will replace only a portion of my current income. And I can admit that while I'm willing to live somewhat frugally in retirement, there are only so many corners I want to cut. I'm hoping that if I save enough money, I can maintain my current lifestyle.
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I'm also aware that it's extremely important to manage my retirement savings well. And that means investing in the right assets and being careful with withdrawals.
A lot of financial experts are quick to talk up the 4% rule for managing a retirement nest egg. But I have one really big problem with that rule, and it's the main reason I refuse to adopt it.
How the 4% rule works
The 4% rule is pretty simple. You start by withdrawing 4% of your individual retirement account or 401(k) balance your first year of retirement. You then adjust future withdrawals for inflation. If you follow that system, there's a good chance your savings will last 30 years.
Why I won't use the 4% rule
My main issue with the 4% rule is that it's pretty restrictive. And I would rather have more flexibility with retirement plan withdrawals based on different factors.
Let's say there's a year when I want to take a major trip. That may require me to take out more than 4% of my savings. But if I have the money, why should I give up that opportunity?
Also, I'd rather let the market help dictate what withdrawals I take. If there's a year when my portfolio enjoys strong gains, why shouldn't I take more money out? And if there's a year when the market underperforms, I should probably try to tap my portfolio as little as possible.
It's pretty similar to how I manage my finances now, actually. As a freelance writer, I have a fluctuating income.
If I have more money coming in, I might splurge a little more on things like restaurants. If I'm not pleased with my earnings, I might cut back in different areas. I don't see why I would manage my nest egg any differently.
Create your own system for managing your savings
The 4% rule is certainly a good starting point to work with in the context of managing retirement savings. But ultimately, I think it's too restrictive for me.
I'd rather be flexible and adjust my withdrawal rate upward or downward as needed rather than be locked into a system that may not work well for my specific circumstances. And you may want to do the same.
I should also mention that the 4% rule may not work well for you because of your investments. A very conservative portfolio may not be able to sustain a 4% withdrawal rate from year to year. A more stock-heavy portfolio, on the other hand, might easily be able to pay you 5% or 6% a year (though if you're going to load up on stocks, I recommend having plenty of cash on hand for protection against a market downturn).
The point, therefore, is to figure out a withdrawal strategy that's as specific to you as possible. And you may decide that you'd like to start by withdrawing 4% of your savings your first year of retirement and take things from there.
But you should reach that conclusion after some careful number-crunching to make sure it's the right decision for you rather than follow a general rule of thumb.
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