For years, the “4% rule” has been the go-to idea in retirement planning. The rule of thumb was simple: take 4% of your pot in year one, adjust for inflation each year, and you should be fine.
But William Bengen, the man who created the rule, has just updated his thinking. He now suggests 4.7% might be safe. Good news? Maybe. But before you start celebrating, let’s unpack it for the UK.
Why the change?
Bengen’s research now includes more data, more diversified portfolios, and more realistic assumptions. Instead of just US large-cap shares and bonds, he’s factored in small-caps, international markets, and a broader mix. That paints a slightly brighter picture.
The UK twist
Here’s the problem: retirement in the UK isn’t retirement in the US.
~Inflation here has been volatile and erodes spending power fast.
~Taxes bite differently: pensions, ISAs, and capital gains all need managing.
~Longevity: we’re living longer, with higher care costs.
~Portfolios: UK gilts and funds behave differently to US bonds and equities.
So while 4.7% might work in theory, it’s risky to adopt it blindly here.
What really matters
Rules are handy, but they’re shortcuts. Retirement isn’t about hitting a percentage. It’s about:
~Knowing your essential income is secure (State Pension, annuities, DB pensions).
~Stress-testing your withdrawals against inflation and bad markets.
~Being flexible, spending more when times are good, tightening up when markets wobble.
My view
4.7% is an interesting update, but in the UK it’s best treated as a conversation starter, not a rule to live by. A safe retirement isn’t about squeezing out an extra 0.7%. It’s about having a plan that fits your life, your assets, and your family.
What do you think, is your plan based on a “rule of thumb,” or on a strategy built for your retirement?
Nic Round is a Chartered Financial Planner and Chartered Wealth Manager, authorised and regulated by the Financial Conduct Authority.