The 4% Rule Failed 4 Times in 98 Years. Here's the Number I'm Actually Using

Finance-specific summary (withdrawal rates, backtests, risk, and instruments)

Core claim: the “4% rule” failed only a few times—but timing clustered

• Over 98 years of stock market history (backtested using returns from 1928 onward), the classic 4% withdrawal rate failed 4 times out of 69 historical 30-year retirements.
• Key failures: those 4 failures were not random—they were clustered in a single bad timing window: 1965, 1966, 1968, 1969.

Emphasized example (“flat tire” framing)

• Retiring in 1966 is framed as the “first mile” of a “flat tire.”
• In that scenario:
  • Stocks struggled for most of the next decade while inflation stayed hot.
  • That combination meant withdrawals bought less each year.
  • The narrative says that by 1992 (27 years in) the portfolio hit zero.
• By contrast:
  • Retiring in 1982 (near a strong bull market start) with the same 4% led to the portfolio finishing 30 years later worth “more than 12x” the starting amount.

Backtest setup and results (60/40 portfolio)

The video repeatedly states the backtest assumes a 60/40 portfolio (stocks + bonds) and tests fixed inflation-adjusted withdrawals over 30 years.

Withdrawal-rate survival (60/40, 69 retirements)

• 3.5% withdrawal rate
  • Survived all 69/69.
  • “No exceptions” across Great Depression, World War II, and 1970s (as stated).
  • On a $1,000,000 portfolio: ~$35,000/year initially, inflation-adjusted.
• 4.0% withdrawal rate
  • Survived 65/69
  • Failed 4/69
  • Failures clustered into the 1965–1969 window.
• 4.7% withdrawal rate (still tested, but survival drops)
  • Survived 55/69 (~80% survival)
  • Implies ~1 in 5 historical retirements would run dry before 30 years.
• 5.0% withdrawal rate
  • Survival drops to 74% (stated as “more than one in four people are failing”)

Updated Bengen “headline rate” depends heavily on diversification

• The video attributes the original 4% rule creation to Bill Bengen (1994) and notes he later suggested an updated worst-case scenario around 4.7%.
• Caution raised: Bengen’s updated rate assumes a more diversified portfolio than a simple stocks + bonds 60/40 approach.

Bengen’s allocation (as read in the video)

• US large cap: 11%
• US mid cap: 11%
• US small cap: 11%
• US micro cap: 11%
• International: 11%
• Intermediate government bonds: 40%
• Treasury bills: 5%

Total: 55% stocks / 40% intermediate treasuries / 5% cash

What happens when applying 4.7% to plain 60/40

• The video then tests Bengen’s “updated worst-case” 4.7% but using the plain 60/40 portfolio:
  • 4.7% survives 55/69, not 69/69.
• Takeaway: the “headline number” may be misleading if the investor doesn’t replicate the underlying diversification.

Risk concept highlighted: sequence-of-returns risk (not just averages)

The video stresses it’s “never about the average return over 30 years” but about:

• Order of returns,
• especially early performance during retirement withdrawal years.

The failures are framed as a concentrated “run of bad years” early enough to permanently harm sustainability.

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Stress-test and alternative approach: avoid fixed withdrawal rates

Proposed “hybrid” concept (explicit framework)

Not a formal model, but it describes a decision rule:

• Do not lock into one fixed withdrawal percentage for decades
• Stress test worst-case
  • The presenter claims a crash worse than the described scenario may never have happened to a 60/40 portfolio in the data.
• If a major drawdown occurs, reduce spending/withdrawals immediately
  • Example given:
    • Retire at 50 with $2.4M
    • Live on $96,000 in year 1 (inflation-adjusted thereafter)
    • If a -50% crash occurs in year 3 (age 52):
      • Losses of ~$1.2M are stated
      • The portfolio would “run out” by age 71 if you kept withdrawing blindly
    • Adaptive response:
      • “Totally scale back,” e.g., drop from about $98k to about $60k for that year
      • Qualitative result stated: “now I’m back on track” (not shown as a full quantified backtest)

Drawdown numbers provided for 60/40 (risk framing)

• Claim: a “crash that size” (-50%) “has actually never happened to a 60/40 portfolio” in the 98-year dataset.
• Worst single year on record for a 60/40 mix:
  • 1931: down 27%
• “Everyone remembers” year:
  • 2008: down ~14% for 60/40 (because bonds rose when stocks fell, per the video)

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Instruments mentioned (tickers/assets) + dividend-income comparison

ETFs / funds / vehicles

• SPY (S&P 500 ETF)
• VOO (Vanguard S&P 500 ETF; cited as “VOO”)
• SPYI (covered-call income ETF; presented as a dividend-focused alternative)

Dividend-income rate and payout figures (as stated)

• The video claims SPYI has:
  • 11.69% dividend rate
  • $0.53 per share per month

Trade-off warning: income vs total return

• The presenter compares:
  • SPYI (covered call / dividend-focused) vs
  • SPY (S&P 500 index exposure)
  • using total return (including dividends).
• Key caution:
  • Dividend/income strategies can cap upside on growth because covered calls trade away some appreciation.
• Presenter’s stance:
  • It can be “absolutely fine” for some investors, but
  • investors must understand the risk/return trade-off and not choose products based solely on yield.

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Explicit recommendations / takeaways stated

• Use the withdrawal rate that matches your personal risk tolerance and your ability to emotionally (and financially) handle drawdowns.
• Don’t rely only on a headline withdrawal percentage (e.g., 4.0% or 4.7%) without matching the portfolio construction assumptions.
• Consider an adaptive withdrawal approach that scales spending down after extreme bear-market years rather than rigidly continuing a fixed withdrawal rate.

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Disclosures

• The video includes a general content disclaimer-style framing typical of “personal finance” content; however, no formal “not financial advice” line appears in the provided subtitles excerpt.
• No explicit regulatory disclaimer text was included beyond general exhortation to “make the best decision.”

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Presenters / sources mentioned

• Bob (presenter; repeatedly referred to as “Bob” in the subtitles)
• Bill Bengen (named as the creator of the original 4% rule and as having updated guidance)