In this episode of the One of a Kind Financial Show, host Mike Milligan interviews William P. Bengen, the creator of the original 4% safe‑withdrawal rule. Bengen explains that after three decades of continued research he has revised the rule upward to roughly 4.6‑4.7%, citing a more diversified portfolio that now includes gold, commodities, REITs, and emerging‑market assets. He notes that the original 4% figure was based on a retiree who entered the market in October 1968 and faced two consecutive bear markets and a decade of high inflation, conditions that have not recurred. In today’s environment—characterized by higher equity valuations and lower inflation—Bengen suggests retirees could safely withdraw as much as 5.5% and points out that the long‑term historical average real return for a balanced portfolio is about 7%. He cautions against over‑optimistic claims such as an 8% withdrawal rate, which was only feasible at the market bottom after the 2009 financial crisis and is unlikely now due to higher valuations and volatility. Bengen outlines his current asset‑allocation guideline of 55% stocks, 40% bonds, and 5% cash, while acknowledging research that supports even higher stock allocations (70‑75% or more) for many retirees. The conversation also includes promotional plugs for the Ideas by Mike podcast, One Oak Financial, and a standard compliance disclaimer.
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Welcome to the One of a Kind Financial Show Daily with your host, Mike Milligan. It is Friday, October 3rd, and do we have a treat for you today. I really believe that everybody is unique and they're one of a kind, and it's a message that I constantly give on the Ideas by Mike podcast. You can hear the Ideas by Mike podcast wherever you listen to podcasts. Or on YouTube. Well, recently in the most recent episode where you don't need millions, the new withdrawal methods and schemes to retire happy. I had a conversation with William P. Bengen. See, Bill back in 1994 wrote the study, which is later came out. Many used it as the 4% safe withdrawal rule. Well, he's updated that with a new book, and I had a conversation with him—a pretty good 30-minute conversation with him because his research is so showing something new about.
Yeah, pleasure being here. Thanks for having me.
Absolutely. You really shook up the retirement planning world with the original 4% rule, but now you've gone back to the drawing board and made some big updates. Um, what made you take another look and how did you land on that new 4.6% rule? 7 figure that's published in your new book, A Richer Retirement?
Sure. I've been working on this for 30 years, continuing my research, learning a lot, and making some breakthroughs. And essentially the 4.7% rule, which is an enhancement of the original 4.15% rule, is all a result of the fact that I'm using a lot more diversified portfolio with more investments in it. Each investment, you know, adds a little bit to the portfolio, and I could probably still add more. It's possible we could reach 5% if I, you know, started adding gold, commodities, REITs, emerging markets, and so forth. But that's where it stands right now. And it's a good guide, but a dangerous guide in the sense that it only applies to a very small number of retirees who want to be ultra-conservative. and not face anything worse than has been faced in the past. Most other people can take out more than that.
Oh, wow. You said an ultra-conservative group of people, right? Right. And then you just ended that with, people can take more than that. I'm very intrigued by what you mean by people can actually take more than the 4.7%.
Sure. The 4.7% rule was created by the person who retired in October of '68 and ran into a terrible environment for investing. They had 2 big bear markets almost back to back, and then had a decade of inflation which forced them to increase their withdrawals dramatically year after year. That just devastated their portfolio. We haven't had a recurrence of that, and I don't see anything in the economic data right now that suggests we'll be entering a period like that. So for a better period economically with better stock market valuations, maybe better inflation numbers in particular, you're going to have an opportunity to take out more. And in this environment, I'd probably be looking at, you know, like a 5.5% rate rather than 4.7%. And remember, the long-term historical average is 7% for the last 100 years. So even though 5.5% 5 sounds great. It's not great compared to the long-term average.
You're a student of numbers, right? It dates back to your job before you became a financial advisor. There are some reckless things that are out there in the financial entertainer space right now. There was a major podcaster that recently said that you could take an 8% safe withdrawal just simply because his mutual funds have averaged 12% per year and there's been 4% inflation. So why can't you take 8%? Do you see that an 8% withdrawal could be like, like general overgeneralizations like that could cause problems to people in the future?
The last time we had an 8% withdrawal rate was back at the very bottom of the stock market. decline after the great financial crisis in the spring of 2009. The person retired in April of that year probably could have taken 8%, it appears. Since then though, we've had much lower numbers, primarily because the stock market has been so expensive and volatile so that, you know, you really have to be careful with what you're saying about what's possible.
Right. You're a huge advocate for diversification these days, way beyond the old just stocks and bonds. If someone wants to get the most out of their retirement, what's your go-to asset allocation now? And are there some lesser-known investments you think retirees should be including?
Well, that's a tough one. I think, you know, I work with a, in my, most of my research, a 55% stock, 40% bond, 5% cash routine. And I'm looking at from a research angle whether that should be higher than that. There are some indications that in many cases people could take, have a 70% or 75%, even a higher allocation to stocks during all of retirement and do well because stocks return much higher than bonds. The time you need bond is when the stock market is not doing well. And that happens, but not that often.
Thanks for listening to me and Bill talk. If you want to hear the whole podcast again, it's episode 33 of the Ideas by Mike podcast, where we talk about some— we talk about diversification, inflation, market conditions, and how they impact retirement success. Those conversations are ones that we have a lot on the Ideas by Mike podcast. We drop a new episode about every 2 weeks. And so If you haven't done so yet, go to YouTube at the@ sign Ideas by Mike and subscribe so you'll be notified when the new episode pops. This week we'll have a new one on why One Oak Financial. Why do we call our company One Oak Financial? If you want to get in contact with us though, I invite you to text the word ideas, I-D-E-A-S, to 600-700 on your phone and we'll get in contact with Until next time, be one of a kind.
One last message from our compliance team. As a reminder, Mike Milligan, Certified Financial Planner, is an investment advisor representative of Advisory Alpha LLC, an SEC-registered investment advisor. All opinions expressed by me, Mike, or any podcast guests are solely our opinions and do not reflect the opinions of Advisory Alpha. This recording is for informational purposes only, should not be relied on solely for investment, tax, or legal decisions, and it's in no way intended to communicate or guarantee specific performance or suitability of any security instrument or product as we may have discussed. Investment advisory and financial planning services offered through Advisory Alpha LLC, a registered investment advisor. Insurance products are provided by Ideas by Mike, a licensed agency located in Norfolk, Virginia, and licensed to do business in all 50 states. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal advice. services. Please consult with your tax or legal professional prior to making decisions related to these issues. If you want us— an appointment with Ideas by Mike or One Oak Financial, please reach out via our website. This podcast is produced in conjunction with Mike Milligan, LLC.
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