Is the 4% Withdrawal Rate Safe in 2026? A Deep Dive

finance_fred · February 13, 2026, 6:35am

With markets at elevated valuations and uncertainty around inflation, a question that keeps coming up in the FIRE community: Is the 4% withdrawal rate still safe in 2026?

I’ve been digging into the latest research, and the answer is: it depends.

What Morningstar Says for 2026

Morningstar’s latest retirement income research (December 2025) suggests 3.9% is the highest safe starting withdrawal rate for a 90% probability of funds lasting 30 years. That’s slightly below the classic 4% rule.

The key insight: if you want a higher success rate (95%+) or need your money to last longer than 30 years, you should consider 3.5% or lower.

Why CAPE Matters

The Shiller CAPE (Cyclically Adjusted Price-Earnings) ratio is sitting around 38 right now—well above historical averages. Here’s why that matters:

Research from Early Retirement Now’s Safe Withdrawal Rate Series shows that every historical failure of the 4% rule occurred when CAPE was elevated at retirement. The correlation between starting CAPE and 30-year safe withdrawal rates is about 0.77—remarkably strong.

In plain terms: retire at high valuations, expect lower sustainable withdrawals.

How I’m Tracking This in Beancount

I’ve built a simple tracking system that compares my portfolio against different withdrawal scenarios:

; Query to calculate portfolio value at different withdrawal rates
SELECT 
  sum(position) as portfolio,
  sum(position) * 0.04 as "4% annual",
  sum(position) * 0.035 as "3.5% annual",
  sum(position) * 0.03 as "3% annual"
WHERE account ~ "Assets:Investments"

Then I compare those annual withdrawal amounts to my actual expenses:

SELECT sum(position) as annual_expenses
WHERE account ~ "Expenses" AND year = 2025

This tells me which withdrawal rate I could actually sustain.

My Personal Take

For traditional retirees at 65? The 4% rule is probably still fine, especially if you’re flexible about spending in bad years.

For early retirees in their 30s or 40s? I’d go more conservative:

50-year horizon: Consider 3.25-3.5%
Elevated CAPE: Shave another 0.25% off
No pension/Social Security supplement: Build in extra buffer

I’m personally targeting 3.3% (about 30x expenses) even though it extends my working timeline by roughly 2 years. The peace of mind is worth it.

Questions for the Community

What withdrawal rate are you targeting?
Are you adjusting for current market valuations?
How do you model different scenarios in your Beancount setup?

Would love to hear how others are thinking about this.

helpful_veteran · February 13, 2026, 6:36am

This is exactly the kind of analysis that keeps me checking this forum! Thanks Fred.

What strikes me about the CAPE ratio discussions is that even among experts, there’s no consensus. Some say high valuations always mean revert. Others say structural changes justify higher prices.

From 4 years of tracking my own FI journey, I’ve learned: the conservative path usually wins.

My Flexible Approach

Rather than picking a single withdrawal rate, I track three “levels” of spending:

Baseline expenses ($32k/year): Absolute necessities
Comfortable expenses ($48k/year): My normal lifestyle
Enriched expenses ($60k/year): Travel, hobbies, gifts

Then I calculate what portfolio I’d need for each at different rates:

Scenario	@ 4%	@ 3.5%	@ 3%
Baseline	$800k	$914k	$1.07M
Comfortable	$1.2M	$1.37M	$1.6M
Enriched	$1.5M	$1.71M	$2M

This gives me flexibility. Hit the middle target? I can probably retire. Hit the top? I’m golden. Miss them all? Keep working.

I track this in Beancount using account tags:

; Tag expenses by tier
2026-01-15 * "Grocery Store" "Weekly groceries"
  Expenses:Food:Groceries  85.00 USD
    tier: "baseline"
  Assets:Checking

Then query by tier to get each spending level.

The peace of mind from having clear “tiers” is worth the complexity!

newbie_accountant · February 13, 2026, 6:36am

The tiered spending approach @helpful_veteran describes is smart! I’ve been trying to figure out how to build flexibility into my planning.

One thing I’m curious about: how do you account for variable withdrawal strategies vs fixed?

I’ve read that some people adjust their withdrawals based on portfolio performance—take more in good years, less in bad years. That supposedly increases the safe withdrawal rate significantly.

But tracking variable withdrawals in Beancount seems complicated. Do you just adjust your annual “withdrawal” transaction, or is there a more systematic approach?

Also @finance_fred—when you mention CAPE, is there a simple way to track market valuations alongside your portfolio in Beancount? Or do you just check it externally when doing your quarterly reviews?

I’m trying to build a system that prompts me when conditions change, rather than having to remember to check things manually. That developer instinct to automate everything!

finance_fred · February 13, 2026, 6:36am

@newbie_accountant Good questions! Let me address both:

Variable Withdrawal Strategies

You’re right that flexible withdrawal rules can increase safe rates. Morningstar’s research shows the “guardrails” approach can support higher initial withdrawal rates—basically, you increase spending after good years and cut back after bad years, within defined limits.

I don’t model this directly in Beancount since it’s more about future behavior than historical tracking. But you could track your “spending flexibility margin”:

SELECT 
  sum(position) FILTER WHERE meta("tier") = "baseline" as minimum,
  sum(position) as actual,
  sum(position) FILTER WHERE meta("tier") = "enriched" as maximum
WHERE account ~ "Expenses" AND year = 2025

The gap between minimum and actual shows how much you could cut if needed.

Tracking CAPE in Beancount

For market valuations, I actually pull CAPE data via a Python script and store it as custom metadata:

2026-02-01 custom "market-data" "cape" 37.8
2026-01-01 custom "market-data" "cape" 36.2

Then my Python analysis scripts read both my portfolio value and these markers to generate quarterly reports.

There’s also a simpler approach: just pull current CAPE from shiller-pe.com during your monthly review and note if it’s above/below historical averages (long-term average is ~17). If it’s double the average like now, be more conservative.