The 3.5% rule
The short answer
Withdrawing 3.5% a year means saving 28.6 times your annual spending. Across 69 historical 30-year retirements since 1928 it survived 100% of them, against 94% for the 4% rule. Stretch the retirement to 50 years and it falls to 94%.
How it held up, by how long the retirement lasted
The rule is usually quoted without a horizon attached, which hides the part that matters. The original research tested 30 years. An early retirement is a different question.
| Retirement length | Periods tested | Survived | Success rate |
|---|---|---|---|
| 20 years | 79 | 79 | 100% |
| 30 years the classic test | 69 | 69 | 100% |
| 40 years | 59 | 58 | 98.3% |
| 50 years | 49 | 46 | 93.9% |
1928 to 2025 market data, 70% stocks and 30% bonds, spending raised by actual inflation each year. Longer horizons have fewer complete periods to test, which is why the count falls as the length rises.
The horizon is the whole story: the same 3.5% rule went from 100% over 30 years to 93.9% over 50. That is 6.1 points lost to nothing but time. Anyone retiring in their forties is planning for the second number, not the first, which is why a single rate quoted without a horizon is close to meaningless.
What the 3.5% rule demands
A rate is really a multiple in disguise. 3.5% means 28.6 times spending, and that multiple is what you spend working years buying.
| Spend per year | At 3.5% | At 4% |
|---|---|---|
| $40,000 | $1.14M | $1.00M |
| $60,000 | $1.71M | $1.50M |
| $80,000 | $2.29M | $2.00M |
| $100,000 | $2.86M | $2.50M |
Every row costs more than the 4% column, and that gap is the price of the safety. On $80,000 a year it is $285,714 of extra capital, which for most households is several more years of work.
Worth weighing against the alternative. A budget with real discretionary spending in it can be cut for two years after a crash, and that flexibility rescues most of the scenarios a lower rate is designed to protect against. It costs nothing, and it is available to anyone whose budget is not already stripped to essentials.
Common questions
What is the 3.5% rule?
Withdraw 3.5% of your portfolio in the first year of retirement, then raise that dollar amount with inflation each year after. It implies a target of 28.6 times your annual spending, against 25 times for the better known 4% rule.
Does the 3.5% rule work?
Across 69 historical 30-year retirements since 1928, it survived 69 of them, or 100%. The 4% rule survived 94% of the same periods. Over 50 years the 3.5% figure falls to 94%, which is the number that matters for an early retirement.
How much do you need for the 3.5% rule?
28.6 times your annual spending. Spending $40,000 a year needs $1,142,857, and $80,000 needs $2,285,714. That is the whole cost of the rule: a lower rate is safer and demands a larger portfolio, so it is bought with working years.
Should I use 3.5% instead of 4%?
It is the more defensible choice for a long retirement, and it is not free. Dropping from 4% to 3.5% raises the target from 25 times spending to 28.6 times, which is years of extra saving. Whether that trade is worth it depends on how much flexibility your budget already has, since a budget you can cut after a crash does much of the same job for free.