Name William Bengen | ||
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Education Massachusetts Institute of Technology Books Conserving Client Portfolios During Retirement | ||
William P. Bengen is a retired financial adviser who first articulated the 4% withdrawal rate ("Four percent rule") as a rule of thumb for withdrawal rates from retirement savings in Bengen (1994); it is often known as the "Bengen rule" in his honor. The rule was later further popularized by the Trinity study (1998), based on the same data and similar analysis. Bengen later called this rate the SAFEMAX rate, for "the maximum 'safe' historical withdrawal rate", and revised it in Bengen (2006) to 4.5% if tax-free and 4.1% for taxable.
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Withdrawal rate
Bengen conducted a number of empirical simulations of historical market behavior and concluded that a person could "draw down", withdraw, up to 4 percent annually from their portfolio without fear of outliving their money. He published his research in the October 1994 issue of the Journal of Financial Planning. He is also the author of the book Conserving Client Portfolios During Retirement (Bengen 2006), where he revised and updated his analysis. He gave a brief updating in Bengen (2012).
Early life and education
A native of Brooklyn, born in 1947, Bengen received a B.S. from MIT in aeronautics and astronautics. He is a co-author of Topics in Advanced Model Rocketry, originally published by the MIT Press in 1973. He worked for 17 years with his family-owned soft-drink-bottling franchise firm in the New York metropolitan area, during which he served tenure as president and COO; the company was sold in 1987.
Financial career
Following the sale of the family business, Bengen moved to Southern California and began a Certified Financial Planner practice, Bengen Financial Services, earning his certification in 1990 and his master's degree in financial planning in 1993. He ran the firm as a fee-only (no commission) practice for twenty years, then sold the firm and retired in 2013.
The Four Percent Drawdown rule
Based on his early research of actual stock returns and retirement scenarios over the past 75 years, Bengen found that retirees who draw down no more than 4.2 percent of their portfolio in the initial year, and adjust that amount subsequent every year for inflation, stand a great chance their money will outlive them.