How Trinity and Bengen 4% Rule Help Retirement

By Cap Puckhaber, Reno, Nevada

The Science of the Safe Withdrawal Rate

I spent years obsessing over every retirement calculator on the internet. My goal was simple but elusive: I wanted to find the perfect number that would let me quit my job without a shred of fear. Most people I talked to were just guessing at how much they could spend each year, and I quickly realized that guessing is the fastest way to run out of money before you run out of life. My journey eventually led me to the work of Bill Bengen and the group of researchers from Trinity University who turned retirement into a science.

These experts didn’t just guess about the future of the stock market or rely on optimistic projections. Instead, they looked back at decades of actual history to see what worked in the real world. This was a wake-up call for me. I learned that my gut feeling about money was often wrong because the math of retirement is fundamentally different than the math of saving. When you are saving, volatility can be your friend; when you are spending, it can be your executioner.

If you want to stop working, you need a plan based on hard data. I call this the science of the safe withdrawal rate. Most people think they can just take out ten percent of their money every year since the market goes up about that much on average. It seems like it should work on paper, but I found out that averages are a dangerous lie for retirees. If the market drops early in your retirement—even if it recovers later—your plan will fall apart because you are selling shares while they are “on sale” just to pay your rent.

The Math of Safe Withdrawals

I believe the most important number in finance is your withdrawal rate. This is the specific percentage of your total savings that you spend in your first year of retirement. Bill Bengen, a financial advisor in the 1990s, wanted to find the maximum amount a person could spend without going broke. He wasn’t satisfied with theoretical models, so he tested his theories against every historical market cycle he could find, including the darkest days of high inflation and deep recessions.

His research led to a very famous conclusion now known as the “four percent rule.” He found that a person could take out four percent in year one and then adjust that specific dollar amount for inflation every year after. This was a massive shift in how I thought about my own portfolio. I realized that a static percentage wouldn’t keep up with the cost of living. If your first-year withdrawal is $40,000 on a $1 million portfolio, and inflation is 3%, your next year’s withdrawal must be $41,200, regardless of what the market did that year.

The genius of this rule is its simplicity and its grit. It gives you a starting point that survived even the worst times in history. Despite the crashes of the seventies and the Great Depression, the rule held firm. It was the first time someone provided a truly safe floor for spending. I started using this math to find my own freedom date, and for the first time, the “perfect number” felt real.

Bengen and the Birth of the Rule

Bengen was a financial advisor who saw his clients struggling with the crushing weight of uncertainty. He didn’t use exotic investments for his testing; instead, he used a simple mix of stocks and bonds. He discovered that a fifty-fifty split was often the sweet spot because this balance protected against both market drops and rising prices. I found his focus on the absolute worst-case scenario very comforting. While most advisors talk about the best-case scenario to sell you a product, Bengen looked for the point of failure.

He called his discovery the SAFEMAX rate. This was the highest withdrawal rate that never failed in any thirty-year period in U.S. history. I started to see my savings as a durable machine rather than just a pile of cash. He published his findings in a professional journal for planners, and it changed the way the industry talked about retirement income. I realized that my own 401k pay calculator needed to reflect this reality. Without this historical context, a calculator is just a toy; but with his data, I could build a life.

Why the Study from Trinity Matters

A few years after Bengen’s breakthrough, three professors from Trinity University decided to pressure-test the same idea. They wanted to see how different asset allocations changed the success rates of a portfolio over various time frames. They looked at portfolios ranging from 100% stocks to 100% bonds. I found their data even more detailed than the original Bengen study because they provided a massive table of success percentages.

Their work confirmed that the four percent rule was remarkably sturdy. Because they used different types of bonds and stocks than Bengen, the results were slightly different, yet the core message remained exactly the same for most investors. If you want a thirty-year retirement, four percent is the gold standard. I used their tables to adjust my own expectations for my portfolio, specifically looking at how a 75% stock allocation performed compared to a 50% split.

They also showed that a high stock allocation was actually a requirement for success, not just an option. If you hold too many bonds, inflation will eventually eat your purchasing power. Conversely, if you hold too many stocks, a single market crash early on could wipe you out. I learned that the middle ground—the “sweet spot” of asset allocation—is where the safety lives. This study remains one of the most cited pieces of research in finance for a reason.

Asset Allocation Secrets

I often get asked if a person should just hold all stocks to maximize growth. The Trinity data suggests that this is actually riskier than a balanced approach once you start taking withdrawals. While stocks have higher returns over the long haul, they also have higher volatility. I saw that a portfolio with twenty-five percent bonds was more reliable because the bonds act as a cushion during a market downturn.

Since I am a fan of the FIRE (Financial Independence, Retire Early) movement, I look at these tables often. I don’t just want a “good” chance of success; I want a ninety-five percent success rate or higher. The professors found that a sixty-forty split achieved this goal consistently. This is the most important lesson for any DIY investor: you don’t need a fancy hedge fund or a high-priced manager to succeed. You just need a disciplined approach to your asset mix.

I started rebalancing my accounts to match these findings. This process took the emotion out of my investing decisions. If the market goes up, I sell some stocks and buy bonds to get back to my target ratio. If the market goes down, I do the opposite. This “buy low, sell high” behavior is built into the rebalancing process, ensuring that I am always following the data rather than my fear.

The Danger of Market Timing

I want to talk about the biggest threat to your retirement security, and it isn’t what you think. Most people think the biggest risk is a low average return over thirty years, but the real danger is something called Sequence of Returns Risk. This is the order in which you get your investment returns. I learned that the first five years of retirement are the most critical period of your financial life.

If the market crashes right after you quit your job, you are in serious trouble. Because you are taking money out while the value is dropping, you are forced to liquidate shares at a loss. This causes a permanent drain on your principal that is hard to fix. I have seen people forced back to work because they ignored this risk. It doesn’t matter if the market recovers ten years later; your portfolio might be too small by then to benefit from the recovery.

I think of it like a plane taking off in a storm. If you can get through the initial turbulence and reach cruising altitude, the rest of the flight is easy. But if you hit a mountain right after takeoff, the flight is over. I use a specific strategy involving a “cash bucket” to handle this risk in my own plan, ensuring I never have to sell stocks during a bear market.

Sequence of Returns Explained

Imagine two investors, Ann and Bob, who both have one million dollars. They both take out fifty thousand dollars every single year. Ann gets bad returns in the beginning and good returns later. Bob gets good returns in the beginning and bad returns later. I found that Ann runs out of money in year 15, while Bob ends up with five million dollars. This happens even if their average return over thirty years is exactly the same.

Because Ann had to sell more shares when the price was low, she depleted her “nest egg” too early. I think this is the most counter-intuitive part of retirement planning. We are taught to only care about the average annual growth, but in retirement, the path you take to get that average is everything. This is why I spent so much time calculating my own failure points.

I wanted to know how a twenty percent drop would affect my lifestyle. Since I know this risk exists, I can prepare for it ahead of time. I keep a two-year cash buffer to avoid selling stocks during a bear market. This simple tactical shift is the difference between a plan that works and a plan that fails under pressure.

My Own Retirement Mistake

I made a huge mistake when I first started tracking my net worth. I assumed that a six percent return meant I could spend six percent. I didn’t account for the volatility of the stock market at all, which led me to believe I was much closer to retirement than I actually was. I felt like I had a massive safety net when I really had a thin wire.

I fortunately found the academic research before I actually quit my job. If I had followed my original plan, I would have retired right before a significant market correction occurred. Because I didn’t understand the sequence risk, I would have been terrified. I likely would have panicked and sold my stocks at the bottom of the market, which is the ultimate cardinal sin of investing. I now realize that a retirement plan must be based on historical failures. It is not enough to look at what happened during the good times; the worst-case scenario is the only one that matters for your safety.

Understanding the SAFEMAX Concept

Bengen’s SAFEMAX describes the absolute worst historical experience. He looked at someone retiring right before the Great Depression started and someone retiring during the high inflation of the seventies. I found it amazing that four percent worked for both of those people. If the rule worked then, it will likely work for us now.

But I don’t treat the four percent as a law that cannot be broken. I see it as a conservative baseline for my financial independence number. Since I want to be extra safe, I sometimes aim for a 3.5% withdrawal rate. This gives me a larger margin of safety for my family. You can read more about these academic studies on major financial sites like Forbes to see the charts for yourself and understand how these numbers shift over 40-year horizons.

Ramsey vs. The Academics

I often hear people quote Dave Ramsey when they talk about retirement. He famously suggests that people can withdraw eight percent or more from their accounts because the stock market grows at twelve percent on average. I think this is some of the most dangerous advice in the financial world. It completely ignores the reality of sequence risk and inflation.

If you take out eight percent and the market drops by twenty percent, you are mathematically doomed. Ramsey focuses on behavior, which is great for getting out of debt, but in retirement, the subtle math is what keeps you from being homeless. He assumes you can just ride out the waves, but he doesn’t account for the fact that you are actively draining the account. When you are saving, a market drop is a gift. When you are retired, a market drop is a catastrophe.

The 8 Percent Problem

If you start with one million dollars and spend eighty thousand, you have a very high hurdle. If the market stays flat for a year, you now have nine hundred twenty thousand. But if the market drops fifteen percent, you are down to seven hundred seventy thousand. A portfolio simply cannot sustain this level of spending for long because the principal gets depleted too quickly to ever recover.

Even if the market goes up thirty percent the next year, you are still behind where you started. I calculated that an eight percent withdrawal has a failure rate of over fifty percent. Since I value security, I stick to the academic numbers instead. Ramsey’s advice works for debt, but it doesn’t work for a thirty-year retirement. You have to decide if you want to be aggressive or if you want to be safe. I choose safety every single time.

Why 4 Percent is Safer

The four percent rule is safer because it builds in a massive buffer. It assumes that you will encounter at least one major crash in your life. Because it is based on historical failures, it prepares you for the worst. This approach lowers my stress level significantly. I don’t have to check the market every single day to feel okay. I know that my spending is low enough to survive a temporary downturn.

If the market drops, I might even decide to spend a little bit less to be safe. This flexibility is what the academics call “dynamic spending guardrails.” Even if I don’t change my spending, the math says I should be fine. You are buying your time back from the world of work, and I don’t want to spend that time worrying about my bank balance. I want to spend it doing things that actually matter to me.

The Problem with Average Returns

The biggest myth in finance is the “average annual return” figure. If a market goes up fifty percent and then down fifty percent, the average is zero. But if you started with one hundred dollars, you now have seventy-five dollars. I saw this play out in my own accounts. The math of percentages is not the same as the math of dollars.

When you add withdrawals to the mix, the problem gets even worse. You are effectively locking in your losses every time you sell for a check. Retirees need to focus on “real” returns after inflation. This is why the four percent rule feels restrictive, but that restriction is what provides the safety you need to survive. I would rather live on a little less and sleep at night than live large and worry about 1929 happening again.

Financial Independence Strategies

I used several different tools to build my plan. I started with a basic 401k pay calculator to see my future balance, but I quickly realized that I needed to understand my specific tax situation. I looked at how a 457b retirement calculator could help me retire even earlier. Because those plans allow for withdrawals before age fifty-nine without a penalty, they are a “cheat code” for early retirement.

It is vital to know the rules of every account you own. I spent weeks reading about the “rule of fifty-five” for 401k plans, which allows you to access your money if you leave your job in that specific year. Combining these rules with the four percent rule is powerful. It allows for a much more flexible path to freedom than a standard retirement age would suggest.

I also focused on increasing my savings rate rather than just picking the best stocks. Your savings rate is the only thing you can actually control. I found that living below my means was the fastest way to hit my number. Most people focus on the wrong things when they start this journey, obsessing over “alpha” while ignoring their spending.

Using a 401k Pay Calculator

I like to use a 401k pay calculator to see the impact of my contributions. If I increase my savings by just one percent, the long-term result is staggering. I found that many people leave money on the table by ignoring their company match. I think of the match as a one hundred percent return on my investment. Since it is free money, I always make sure to get the full amount.

I also use these calculators to estimate my future tax bill. If I put money into a traditional 401k, I save on taxes today, but I will have to pay taxes later. I started balancing my traditional accounts with a Roth IRA to diversify. This gives me more control over my income when I stop working. You should also find a calculator that accounts for dividend reinvestment. Dividends are a massive part of the total return of the stock market, and automating this process is a small change that makes a huge difference over twenty years.

Planning with a 457b

The 457b plan is one of the best tools for early retirement, usually offered to government employees or hospital workers. The lack of an early withdrawal penalty is a massive advantage because it bridges the gap between your retirement date and the age of sixty. I helped a friend use this plan to retire at age fifty without any issues.

We calculated his financial independence number using the Trinity Study data, and he knew exactly how much he could take from his 457b each year. Since he didn’t have to worry about penalties, he stayed in a lower tax bracket. More people should look for these specific types of employer plans. They are often overlooked because they are less common than the 401k, but they are often more valuable for the early retiree.

Federal Employee Specifics

I receive many questions about retiring from the federal government. This is a complex topic involving a pension, Social Security, and the Thrift Savings Plan (TSP). Federal employees have some of the best benefits in the country, but they still need to understand the four percent rule for their personal savings. The pension might not cover all of your expenses, especially if inflation spikes.

I recommend using a federal disability retirement calculator if you have health issues. This can help you understand your options if you cannot continue working. It is also important to know your “MRA” or minimum retirement age. Retiring just one year too early can cost you thousands in lifetime benefits. I always tell people to get a copy of their benefits statement every year and look at a “Social Security break even chart” to decide when to claim. You need to look at your own health and your own family history to make these final puzzle pieces fit.

Advanced Withdrawal Tactics: Guardrails

I want to explore the concept of dynamic spending. This is a strategy where you adjust your withdrawals based on market performance. If the market is doing great, you might take a little extra for a vacation. But if the market is down, you cut back on your discretionary spending. This approach significantly increases the success rate of a portfolio.

This is often called the “guardrails” method. You set a ceiling and a floor for your annual spending. This is a more realistic way to live than a rigid four percent rule because most people naturally spend less when their accounts are shrinking. I use a simple version of this: I have a list of “bare bones” expenses I can cut if I need to. This flexibility is a safety valve that ensures I never hit the point of failure.

Managing Taxes in Retirement

Taxes can be a huge drain on your retirement income. If all of your money is in a traditional 401k, the government is your business partner and will take a cut of every dollar you withdraw. Managing your tax brackets is a vital skill. I use a strategy called Roth conversions to move money from traditional accounts to Roth accounts in low-income years.

I pay the tax now so that I don’t have to pay it later when rates might be higher. This is one of the most effective ways to build long-term wealth because growth in a Roth account is tax-free. I also use a Social Security tax calculator to see the impact of my withdrawals. A small increase in income can trigger a large tax bill, so working with a professional at least once is a wise investment that can save you tens of thousands.

Staying Within the Success Zone

The success zone is the area where your withdrawal rate and asset allocation overlap. If you stay within this zone, your chances of running out of money are very low. The four percent rule is the best way to define this zone because it is based on the hardest times we have ever faced. I think of my plan as a living document that I check every year.

Since I use the Trinity Study as my guide, I feel confident. I don’t let the headlines or the latest “experts” sway my decisions. I stick to the academic data that has stood the test of time. I hope this guide helps you understand the power of the math. When you know the math, you lose the fear. And losing the fear is the true goal of retirement planning.

Frequently Asked Questions

What is the primary difference between the Bengen rule and the Trinity Study?

Bill Bengen was a single researcher who looked at historical data to find a safe maximum withdrawal rate for a thirty-year period. The Trinity Study was conducted by three professors who expanded on this work by showing success rates for different asset mixes. While they both support the four percent rule, the Trinity Study provides more options for different portfolio types. I find that both studies are essential for a complete understanding of retirement math.

Why does Dave Ramsey suggest a higher withdrawal rate than the academic studies?

Dave Ramsey often focuses on the long-term average return of the stock market which is around ten to twelve percent. He argues that you can spend most of that growth and still be fine because the principal remains untouched. But the academic studies show that market volatility and inflation make this a very risky strategy. I believe the academic approach is much safer because it accounts for the sequence of returns risk.

Is the four percent rule still valid in a low-interest-rate environment?

Many experts have debated this topic because bond yields have been lower in recent decades than they were in the past. Some researchers suggest that a lower rate like three and a half percent might be more appropriate today. But Bill Bengen recently updated his own research and suggested that five percent might even be possible in some cases. I stick to four percent because it provides a conservative middle ground that I can trust.

How do I handle inflation with the four percent rule?

You start by taking four percent of your total portfolio value in your first year of retirement. In the second year, you take that same dollar amount and increase it by the actual inflation rate from the previous year. You do not take four percent of your new portfolio balance every single year. This ensures that your spending power remains the same even as the cost of goods goes up. I find that this is the most common mistake people make when they try to use the rule.

Can I use the four percent rule for a retirement longer than thirty years?

The original studies focused on a thirty-year timeframe because that is the standard length of a traditional retirement. If you plan to retire early and need your money to last fifty years, you should be more conservative. I recommend a withdrawal rate of three percent or three and a half percent for a very long retirement. This gives your portfolio more room to grow and survive more market cycles. Since I plan to be retired for a long time, I aim for the lower end of the scale.

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About the Founder / Author

Cap Puckhaber is a seasoned marketing strategist and finance writer, based in Reno, Nevada with over 20 years of experience investing, marketing and helping small businesses grow.

He offers expert advice on how to save for retirement, how to use a retirement calculator and the difference between T-Bills and CDs.

Cap Puckhaber shares actionable insights on how to promote your business locally for free and on trending platforms like X.

He shares his personal investment journey, how to use trade volume to predict breakouts, and his take on covered call strategies.

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