KEY TAKEAWAYS:

• The widely used 4% Rule has been revised to 4.7% by its original creator, William Bengen.
• Retirement planning research has advanced significantly since 1994, yet many financial advisors still rely on outdated rules of thumb.
• Specialized retirement planning—supported by decades of academic and applied research—can help clients make better decisions about their retirement income strategy.

As you may have noticed in our Insights, we often challenge traditional retirement rules of thumb—such as the 4 percent rule—because they don’t always align with a planning approach centered on quality of life.

This ongoing conversation around retirement “rules” isn’t just theoretical—it’s evolving in real time. In fact, one of the most well-known guidelines in retirement planning recently made headlines again.

A story highlighted by Financial Advisor Magazine in September 2025 was that the 4% Rule is now the 4.7% Rule, according to William Bengen, the founding researcher.  

Why Has the 4% Rule Been Updated?

The original article appeared in USA Today, and in it, Bengen states, “It is surreal, I can’t believe that I’m still doing this, 30 years later.”  Yes, we second this notion!  Especially after learning the reason Bengen is changing the math for his rule (that he now calls the 4.7% rule in a new book he published in August) - it is due to the introduction of basic portfolio construction concepts introduced by Harry Markowitz in his foundational Modern Portfolio Theory work developed in the 1950s!  

Bengen’s original 1994 research assumed a portfolio of 50% U.S. government bonds and 50% large-company stocks, hardly what would have been considered a maximally diversified portfolio (even then).  Bengen’s revised math now includes seven asset classes in his new, more broadly diversified investment portfolio, and behold, better risk-adjusted returns.  

Our intent is not to beat up on William Bengen for the research he introduced to our industry.  It was an interesting academic question he answered in 1994: “What’s the largest withdrawal percentage one could start with and not run out of money after annual inflation adjustments in any year observed?”

Bengen was not trying to find a particular retiree’s optimal withdrawal rate (see “Aim Higher Than "Not Running Out of Money" – Is Your Safe Withdrawal Rate Costing You Money and Quality of Life?” Insight).  Unfortunately, and with much misunderstanding, the 4% rule spread like wildfire among people and financial advisors due to its simplicity.  The 4% rule made a very complex problem simple, right or wrong.  

Side note -- What made Bengen’s research important was not the 4% rule that resulted, but rather the introduction of the concept of Sequence of Returns Risk.  Anyway, our point is that his thinking and research are very old, and this should not be news (let alone a new book) anymore.

Why Financial Advisors Fail to Provide Updated Retirement Advice

It is understandable that uninformed individuals may still adhere to such rules of thumb, but it is inexcusable for financial advisors to do so.  A substantial body of research and knowledge exists that should enable financial advisors to deliver significantly better retirement planning advice to clients.  A non-exhaustive list of foundational research includes:

1952 - Markowitz’s Modern Portfolio Theory

1954 - Modigliani & Brumberg’s Life-Cycle Hypothesis

1970 - Fama’s Efficient Market Hypothesis (cornerstone of passive vs. active debate)

1990 - Sharpe applies Monte Carlo simulations to retirement planning

1994 - Bengen’s The 4% Rule

1997 - Evensky’s Time Segmentation 

2002 - S&P Indicies Versus Active (SPIVA) Scorecard introduced

2004 - Thaler’s Behavioral Nudges 

2006 - Guyton-Klinger’s Guardrails Approach

2012 - Pfau’s Safety First 

2014 - Blanchett’s Retirement Spending Smile

2021 - Reichenstein’s Tax-Efficient Withdrawal Strategies 

To ignore all the thoughts and lessons learned by this incredible body of work does not seem like a Fiduciary thing to do.  So why is it that individuals are not getting better advice when it comes to retirement planning?

We believe most Registered Investment Advisor (RIA) financial advisors take their Fiduciary duty to their clients seriously, and they want to do the best they can for their clients (not so sure about this on the Broker-Dealer side of the fence - beware).  

We think the core disconnect lies with two industry issues: 1).  lack of specialization and 2).  lack of incentive.

1). Lack of Specialization

The financial advice industry is still relatively young and consists mainly of firms trying to serve anyone who can afford their fees.  The firm’s primary goal is to collect assets to make more money (like any other for-profit firm).  Firms have been reluctant to specialize within a financial advisory discipline because they don’t want to risk disenfranchising anyone.  

As a consequence, firms have been built with generalist systems, and financial advisors have been hired and trained to work with anyone at any stage of life across all financial advisory disciplines (think family practice versus heart surgeon). This has led to many advisors developing only a surface level of knowledge and expertise across a wide array of financial topics.  As a result, the retirement planning process and capabilities in these generalist firms have evolved very slowly and tend to look pretty homogeneous.

2). Lack of incentive

Financial advisory firms often do not have an incentive to change.  First, being a young industry, firms have not been forced to specialize in order to compete.  Generalist business models have been good enough to grow and remain profitable.  Why would a firm change now by saying “no” to a portion of the market?  

Second, retirement planning is a lot of work.  The vast majority of firms charge based on the size of a client’s portfolio.  This means firms have a financial incentive to attract new assets and help people accumulate assets.  

They have no interest (or incentive) to help clients decummulate (i.e., maximize their withdrawals in retirement), let alone to spend more time with these clients or invest in greater knowledge or capability to better advise clients during this very complex stage of life.  It’s been all too easy for these firms to be really conservative and simplistic in their advice.  After all, the byproduct can be a portfolio that was larger than when it started.      

Why It’s Better to Get Retirement Advice from a Retirement Planning Specialist

Energized by our sole mission to help clients make the most of their retirement, we are proud to be leading the charge in retirement planning specialization and flat-fee pricing, enabling us to deliver more meaningful advice to clients (see our Insight entitled “Why a Flat-Fee Advisor is Best for Retirees” for more information).

Understanding that our clients do not get do-overs, we are committed to helping them make the most of their financial resources so they can live their very best life in retirement.  To execute on our mission, we have invested heavily in our expertise, and we bring all the latest thoughts and strategies to the table across retirement income planning, tax planning, investment planning, and risk management.  

At Thrive Retirement Specialists, our flat-fee financial advisors are truly specialists when it comes to retirement planning and our purpose is to deliver a more thoughtful and rewarding retirement planning experience to our clients, enabling them to live life to the fullest in confidence. If you’d like to schedule a complimentary call with one of our retirement specialists, click here.