How Long Will Retirement Savings Last? Is the 4% Rule Still Valid? How to Save and Invest Wisely for the Future

Last Updated on August 18, 2021

MyFinancialTimes is a reader-centric site. We may receive compensation from the products and services we mention or recommend in this story, but the opinions are the author's own. Remuneration may impact where offers appear. We may not include all available products or offerings. To learn more you can visit our advertising policy and editorial policy.

How long will retirement savings last? That’s a fear that creeps into the minds of many Americans once they turn the dreaded 5-0.

But if you take things in small steps and focus on your goal, there’s a good chance you’ll be able to retire comfortably, and maybe even early.

Explaining the 4% Rule

Published in 1994 by William Bengen, the guideline — called the 4% rule — notes that, if you maximize your retirement savings plan and invest half of it in stocks and the rest in bonds, there’s a good chance that you’ll be able to withdraw 4% of your nest egg every year for 30 years, without running out of money. And this is adjusted for inflation. 

Of course, this is just a general rule. In particularly high-inflation periods like the one we’re in now, or serious economic or stock market downturns, your funds will dwindle faster — or not go as far. But in times when the stock market and economy are going up and inflation is under control, you’ll be able to take out a smaller percentage and still be fine. 

Still, you shouldn’t worry much about those variables, considering that Bengen ran the numbers on the above theory looking back at some of the United States’ worst markets, and 4% was the safe withdrawal rate over any 30-year period. The 4% rule allows for inevitable ups and downs.

The Importance of Investing Regularly

So, given the above guideline, the likelihood of success is strong as long as you max out that 401(k) and invest at least 50% in stocks. But just as important as investing in the right mix of stocks and bonds is investing regularly over time. Frequent, regular investments allow you to weather the ups and downs of the market and slowly build a big nest egg, especially if dividends are involved (never forget the incredible power of reinvesting dividends). 

Retirement Calculator
Putting all your present and projected costs into a retirement calculator can be very helpful. Photo credit:

So How Much Will I Need?

First, add up your fixed expenses per month. These are expenses that won’t change, such as:

Rent or mortgage and home expenses like utility payments, water bill, etc. 

Health insurance/medical bills

Other insurance

Food and other daily necessities 

Phone and Internet bill

Next, the fun part. Add up estimated monthly expenses for things you’ll want to do in retirement, like:

Pursuing hobbies

Home repairs


Cultural activities 

Total all of the above, and multiply the number by 12 to get your yearly expense needed in retirement. Then multiply that by 30 years. As noted, it’s not an exact number, but it’s a good jumping-off point for planning purposes. 

Use a Retirement Calculator 

An easy, automated way to make the above calculation is a retirement calculator. Just type in your variables and see how much you need. A retirement calculator is especially helpful because you can easily adjust by adding or changing one variable. (For instance, you can try two different rent amounts.)

Don't Panic About Retirement
Above all else, don’t panic. If you start planning early, that will make a world of difference. Photo credit:

Don’t Panic!

Don’t panic when you see the numbers on the calculator. In many cases, the number will be $1 million; perhaps well over. This figure is mentioned in a lot of fear-based news pieces, and it can cause a lot of worry (“I have to be a millionaire to retire!”). 

But there is one key factor that makes a huge difference: planning in advance. Speak to your financial advisor long before the age you want to retire. Do the calculations as early as possible. Come up with a realistic plan you can stick with long-term.

If you cut your expenses too much it may not be realistic. On the other hand, if you allow for too much spending, you could run into a financial problem down the line.

Find a middle ground. Once you have calculations that work for you, the rest with fall into place.