That rule came from a financial planner named William Bengen in 1994. He looked backward at historical markets and concluded that a retiree could withdraw 4% of their savings in year one, adjust it for inflation each year after and probably not run out over 30 years. It was a fine piece of work for 1994. But relying on a 30-year-old math equation from the Clinton era to dictate your lifestyle today is not a strategy. It is a gamble. And at today’s prices, betting your entire retirement on it can be a fast track to running out of gas early.

The rule’s real flaw is not the number

People argue about whether the safe number is 4% or something lower. Morningstar, which re-runs this research every single year, has landed on a starting safe withdrawal rate of 3.3% in 2021, 3.8% in 2022, 4.0% in 2023, 3.7% in 2025, and 3.9% for someone retiring in 2026. Meanwhile Bengen himself, the man who invented the rule, has since revised his own worst-case figure upward in a recent book. So we have the inventor moving the number one direction and the leading research firm moving it another, every year.

That tells you everything. The flaw was never the exact percentage. It is the idea that a single fixed number, locked in for three decades, can survive whatever the market and inflation throw at it. A static rule cannot duck.

Why Utah makes the gamble riskier

Two things make this rule especially shaky for the people I serve here. The first is sequence-of-returns risk. If the market drops hard in your first few years of retirement, while you are also pulling money out, you sell shares at the bottom and the damage compounds. Researchers call the years right around retirement the “red zone” for exactly this reason. We just lived through serious volatility, and plenty of Utahns are walking into that red zone right now.

The second is cost. Inflation has stayed stubborn, and the Wasatch Front has not been spared. Housing, property taxes and everyday costs along the Salt Lake corridor have climbed faster than the national average for years, fueled by all the people moving here. A withdrawal rule calibrated to national averages quietly underfunds a retiree living in Davis, Weber, Utah or Salt Lake County. And do not forget the state takes its cut. Every dollar you pull from a traditional IRA is taxed at Utah’s flat 4.45% on top of federal tax, so your gross withdrawal has to be larger than your spending number to begin with.

Add it up: Long, healthy Utah lifespans that can stretch retirement past 30 years, faster local cost increases, a tax on every withdrawal and the chance of a bad market in the worst possible window. A rigid 4% rule was not built for any of that.

A hybrid playbook instead of a rule of thumb

So what do I tell people to do instead? Stop running your whole life off one percentage. Split the job in two.

First, cover your floor. Add up what it actually costs you to keep the lights on, the property taxes paid, the groceries bought and the medications filled. Those non-negotiable expenses should be matched, as much as possible, by income you cannot outlive and the market cannot touch. Social Security covers part of it. A fixed index annuity with a guaranteed lifetime income rider can cover much of the rest, turning a slice of your savings into a paycheck that arrives no matter what the Dow did that morning.

Second, let your fun money grow. Once your essentials are locked down by guaranteed income, the rest of your portfolio can stay invested for the long haul, funding travel, grandkids and the good years without you panicking every time the market hiccups. Here is the part the research actually supports: The more of your fixed expenses are covered by guaranteed income outside your portfolio, the more flexibility you have with the rest, and the higher your sustainable spending can safely climb.

That is the difference between a rule and a plan. A rule hands you one number and wishes you luck for 30 years. A plan separates what you need from what you want, guarantees the part you cannot afford to lose, and lets the rest work for you. If your retirement is still running on 1994 math, it may be time we sat down and built something made for the road ahead.

Lyle Boss, The REAL BOSS Financial, a native Utahn and retirement specialist who has spent decades helping families across Utah and the Mountain West build secure, income-focused retirement plans. Boss Financial, 955 Chambers St. Suite 250, Ogden, UT 84403. Telephone: 801-475-9400. https://www.safemoneylyleboss.com/