Is the 4% Rule Too Frugal for Doctors?

The 4% rule has guided retirement planning since 1994 — but it was designed for 30-year retirements, not the 50-year horizon a physician retiring at 45 is looking at.

Some in the FIRE community treat the 4% rule with religious reverence. That reverence is well-deserved. The 4% rule has been a safe starting point for many a retiree looking to enjoy a successful retirement.

But for physicians, the story is slightly different. For us, the 4% rule creates a weird paradox where you’re simultaneously saving too much for some scenarios and nowhere near enough for others.

Let me explain why.

What is the 4% Rule?

Back in 1994, Bill Bengen asked a simple question: If I retire with a pile of money invested in stocks and bonds, how much can I take out each year without going broke?

He backtested this using historical market data and concluded that withdrawing 4% in year one, then adjusting that dollar amount for inflation each year, should last at least 30 years even if you retire at the worst possible time in history.

The Trinity Study backed this up in 1998, and since then, it’s been the go-to answer for “how much do I need to retire?”

If you want:

• $40,000/year? Save $1 million
• $100,000/year? Save $2.5 million
• $200,000/year? Save $5 million

Just multiply your annual spending by 25 and boom, there’s your number.

Except here’s where it gets interesting: In 2025, Bengen himself came back and told CNBC that you can probably go higher. After refining his analysis, he now suggests 4.7% is safe, and with some tweaking, you can push it to 5%.

So the guy who invented the 4% rule thinks it’s too conservative. How does that work? The devil is in the details that nobody talks about.

Learn more about: The Problem with the 4% Rule (and Why You Could Retire Even Sooner)

Your Retirement Number is Fiction (And That’s Actually Fine)

Let me save you some time: Whatever FIRE number you’ve calculated is wrong. Not because you made an error, but because you’re trying to predict an inherently unpredictable future using incomplete data from the past.

Think about what you’re actually doing when you calculate a FIRE number. You’re taking your current spending, making assumptions about the next 50 years of:

• Market returns
• Inflation rates
• Healthcare costs
• Tax policy
• Your health status
• Your family situation
• Your housing situation
• Technology disruption
• Political stability
• Anddd…about 47 other variables

Then you’re multiplying by 25 and calling it a plan.

It’s like doing a meta-analysis based on three case reports and some expert opinion. We’d never accept that level of evidence in medicine, but somehow it’s fine for retirement planning?

The academics studying withdrawal rates will tell you this themselves— there’s maybe 90 years of decent U.S. market data to work with. That’s three independent 30-year retirement periods.

Most studies ignore real estate, focus only on U.S. markets, and assume you’ll spend exactly the same inflation-adjusted amount every single year.

In reality, your spending will look nothing like that smooth line on a chart.

What Actually Changes Between Working and Retirement (Hint: Everything)

When I tracked my family’s spending during my early working years, we weren’t buying cars. We weren’t dealing with teenage drivers, although my kid is still quite a few years away from car ownership. We weren’t facing the reality that a “once in a lifetime” home repair somehow happens every 18 months.

I’m still not retired in the true sense of the word, but in conversation with several friends and colleagues who are, I discovered that retirement expenses are nothing like working expenses.

Here are some things that vanished: 

• Commute costs when you factor in wear, gas, and the actual IRS mileage rate
• Dry cleaning for professional clothes disappeared
• Buying lunch out dropped by 80%
• The emotional tax of having an alarm clock ended (priceless)

Things that exploded:

• Car insurance — families routinely see premiums increase 50–100% or more when a new teen driver hits the road
• Travel went from $20,000 to $50,000 because suddenly I had time
• Home maintenance revealed itself to be an annual five-figure expense, not the occasional nuisance I’d imagined
• Teenagers eat like competitive bodybuilders, and once they hit 12, every restaurant, theme park, and airline charges them full adult prices

Things that eventually disappeared:

• That $4,000/month mortgage payment will end at some point
• Kids launch (theoretically), and your household expenses can drop 40%
• Work-related professional development, licensing fees, and association dues become optional

But the 4% rule doesn’t account for any of this lumpiness. It assumes you’ll need exactly $100,000 this year, $103,000 next year (with 3% inflation), $106,090 the year after that, perfectly smooth forever.

That’s not how life works. That’s not even how retirement works.

The Healthcare Grenade That Will Explode Your Plan

Okay, here’s where physician early retirement gets truly complicated.

We need to talk about the financial nightmare that is U.S. healthcare when you’re neither poor enough for Medicaid nor old enough for Medicare.

According to the KFF, Affordable Care Act (ACA) premiums (no subsidies, benchmark silver plan) climb aggressively with age.

KFF’s 2026 modeling shows that a 45-year-old buyer faces meaningful year-over-year premium growth, typically adding around a thousand dollars or more in annual costs depending on income tier and state pricing.

That’s the “middle-aged squeeze” in action: health-care inflation plus age-based rating combine to push gross premiums higher, even before you get into plan design or deductible choices.

The acceleration becomes far more dramatic for people approaching 60. KFF’s analysis shows that older couples absorb the biggest jumps because premiums are already high and the baseline grows faster.

A 60-year-old couple can see several thousand dollars added to their yearly bill as insurers price in rising medical costs and higher projected utilization.

Stack those increases on top of the already steep 2025 premiums (roughly $19,000 a year for a benchmark plan with no subsidies), and it’s clear that marketplace coverage gets exponentially more expensive as you near Medicare eligibility, and early retirees need to model that curve with precision.

If you’re planning to spend $85,000 annually in retirement, by age 60, health insurance premiums for you and your spouse alone will consume 27% of your budget before you’ve seen a single doctor or filled a single prescription.

The 4% rule assumes your spending increases with general inflation— let’s say 3% annually. Healthcare costs have been increasing at double or triple that rate.

This is mathematically incompatible with the 4% rule for early retirees. “But I’ll qualify for subsidies!” Maybe.

That requires:

• Keeping your Modified Adjusted Gross Income artificially low
• ACA subsidies surviving whatever political winds blow through Washington
• Your state not adding additional restrictions
• You being comfortable with the psychological adjustment of deliberately minimizing income after years of maximizing it

Even with subsidies, what if multiple family members need care in the same year? Fingers crossed you’ve got flexibility in your budget.

Here’s the part that keeps me up at night: You can do everything right, maintain a healthy weight, exercise daily, don’t smoke, manage stress, and still get absolutely destroyed by health problems.

I’ve seen the marathon runner diagnosed with MS. The non-smoking yoga instructor with lung cancer. The CrossFit enthusiast who developed rheumatoid arthritis at 40.

When you’re truly sick, you’re not comparison shopping or worrying about your FIRE number. You’re just trying to survive. And that’s when the financial damage happens.

In case you missed it: Planning for Healthcare Costs in Retirement as a Physician

What the 4% Rule Actually Means for Physician Early Retirement

Physicians occupy this strange middle ground in retirement planning that nobody really addresses.

You’re not the extreme FIRE crowd living on $35,000/year through hyper-optimization and travel hacking. Those folks can sustain a 2.5% withdrawal rate while still enjoying life because their baseline needs are so low.

But you’re also not the typical American retiring at 65 with a pension and Social Security kicking in immediately. You’re trying to bridge a 30-year gap before Medicare, often with student loan debt that delayed your savings, and usually with lifestyle expectations that reflect your education level and income.

This set of circumstances often leaves even the best of us wondering: “Why be so frugal if I’m just going to be saving forever? What am I saving for if I can’t enjoy my best years to travel and have basic comforts?”

This cuts to the core issue. After sacrificing your twenties to medical school and your thirties to residency and fellowship, the idea of continuing to live like a resident for another decade “just in case” feels soul-crushing.

The successful early retirees I’ve seen aren’t uniformly frugal across everything. They’re strategically frugal.

One physician on Reddit described his approach. He bought a $250,000 house when his colleagues bought $700,000 houses. He drove the same truck for ten years while peers upgraded to luxury SUVs every three years.

But he didn’t skimp on travel or experiences with my family. Now, he works half-time, and even though he isn’t 40 yet, he could quit tomorrow. His colleagues with the fancy houses? Still grinding full schedules to pay for them.

That’s strategic frugality, i.e., saving aggressively on things that don’t matter to you so you can spend freely on things that do.

The Flexibility Factor That Nobody Calculates

What I’ve learned, actually living in retirement, is that the ability to adjust spending matters infinitely more than hitting some precise withdrawal percentage.

Think about the accumulation phase. What mattered more, whether you saved exactly 22% or 25% of your income, or whether you could adjust your savings rate when your income changed or unexpected expenses hit?

The same principle applies in retirement.

Structure your spending so:

• 20–25% is truly fixed (property taxes, insurance you can’t adjust)
• 25–30% is variable but necessary (food, utilities, transportation)
• 45–50% is discretionary (travel, dining, entertainment, gifts)

Having the ability to cut spending by 45% if needed is worth more than precisely calculating whether to use 3.8% or 4.2%.

This is where ultra-frugal retirement actually becomes risky. If you’re already living on $35,000/year with everything optimized, what do you cut when your health insurance premium increases unexpectedly? You’re already on the cheapest cellphone plan, already cooking at home, already driving an old car.

Compare that to someone spending $120,000/year with:

• $35,000 in fixed costs (property taxes, insurance, utilities)
• $30,000 in variable but necessary costs (food, gas, basic maintenance)
• $55,000 in discretionary spending (travel, dining out, gifts, hobbies)

That person can cut their spending by 45% relatively painlessly if markets tank or unexpected expenses emerge. They just skip the European vacation, eat out less, and hold off on home renovations.

The irony is that having a higher spending baseline with lots of discretionary spending actually makes retirement safer if you’re willing to adjust.

What Happens When You Blow Past the 4% Rule

Let’s say your goal is $100,000 in annual spending, so you target $2.5 million (25x). You hit that number and keep working a few more years while markets do their thing. Now you’ve got $3.5 or $4 million, which is 35–40x of your spending.

What changes?

The good news

You’ve survived the most critical sequence of returns period. If you’ve been retired 5–6 years and markets have been strong, you’re essentially bulletproof now. Your risk of portfolio failure has plummeted.

The temptation

Should you spend more? Upgrade lifestyle? Take that fancy European vacation? Buy a nicer car?

The caution

Bull markets tend to be followed by bear markets. Don’t reset your spending based on the inflated portfolio value. The 4% rule accounts for good times and bad. If you only experienced good times and reset to “4% of my new higher balance,” you’re now exposed to downside sequence risk all over again.

The reality

Most people in this situation don’t dramatically increase spending. They just feel more secure. The bigger pile provides a psychological cushion more than lifestyle inflation.

I’m not saying to never spend your investment returns. If you’re following something more conservative than 4%, you’ll probably die with massive piles of money unless you give it away or choose to spend more.

But context matters. If you’re 48 with potentially 50+ years of investing ahead. You could stand to be more cautious. But your parents, in their late seventies, taking a $30,000 trip to South Africa?

They don’t need to worry about 50-year time horizons. They could absolutely spend those investment gains without fretting.

Life in Actual Retirement

People ask what the biggest difference is between what I thought retirement would be like versus reality.

Honestly? I thought I’d be more productive.

You know Parkinson’s Law? Work expands to fill the time available. Well, in retirement with unlimited time, tasks that you’d knock out in a weekend now…drift. There’s no deadline. No urgency. “I’ll get to it eventually” becomes the default mode.

When I was working full time, if I had a weekend project, I’d get it done because the weekend was all I had. Now? I’ll putz around for an hour here, an hour there. Things take way longer when there’s infinite time.

At first, after retirement, I felt this compulsion to be ultra-productive. Run everywhere, produce constantly, optimize every hour.

Then I realized: that’s not the point. It’s okay to read a book that doesn’t teach you anything. It’s okay to watch football all weekend. That’s actually the whole reason I sort of retired — to have that option.

There’s no urgency to most of it, and I’ve made peace with that.

After all this, I can safely conclude that the specific withdrawal rate matters way less than you think.

What actually matters:

• Your flexibility to adjust spending up or down. This beats any perfectly calculated initial rate.
• Your psychological comfort with uncertainty. If you can’t handle not knowing exactly what will happen, you’ll either forgo returns with overly conservative allocations or waste money on expensive insurance products.
• Multiple income options. Don’t rely solely on portfolio withdrawals. Side hustles, part-time work, rental income — even small amounts can dramatically improve outcomes.
• Protection against early sequence risk. Keep 2–3 years expenses in cash or bonds so you’re not forced to sell stocks during crashes in those critical first five years.
• Understanding your actual priorities. Are you optimizing for maximum portfolio value, maximum freedom, maximum experiences, or maximum security? That answer matters more than any withdrawal percentage.

The engineer types can keep arguing about whether 3% is safer than 4%. That’s not how human psychology works. That’s not how retirement actually plays out.

Get in the ballpark (somewhere between 3–5% depending on your circumstances) and build massive flexibility into your plan. Then adjust as reality unfolds.

Because I can almost guarantee you this, reality will be nothing like your spreadsheet predicted.

Pick Your Poison

The Conservative Route: 3% Withdrawal Rate

This is for physicians who value peace of mind over speed to retirement.

Want $150,000/year? You need $5 million saved.

The upside: You’ll have a massive cushion for healthcare cost explosions, family emergencies, market crashes, or living to 100. You’ll sleep well through volatility. You probably won’t ever need to adjust spending downward.

The downside: You might work 5–10 years longer than necessary. If markets cooperate, you’ll die with a massive estate you never got to enjoy. You might look back at 75 and realize you could have retired at 50 instead of 55.

The Aggressive Route: 5% Withdrawal Rate

This is for the physicians willing to accept a higher risk for more years of freedom.

Want $150,000/year? You need $3 million saved.

The upside: You retire potentially 5–10 years earlier. You get those years while young, healthy, and energetic. If markets cooperate (and they usually do), you’re fine.

The downside: You’re vulnerable to bad sequence of returns in early retirement. Healthcare cost explosions hit harder. You’ll need to either cut spending or return to work if things go wrong.

That means there’s less margin for error.

The Flexible Route: Dynamic Withdrawal

This is for physicians who understand that precision is impossible and adjustment is everything.

Start with 4% but adjust based on reality:

• Portfolio up this year? Increase spending or give more away
• Portfolio down? Cut discretionary spending temporarily
• Healthcare costs spike? Defer that home renovation
• Got a part-time gig you enjoy? Reduce portfolio withdrawals

Structure spending so that at least 45% is discretionary. Establish and maintain multiple income streams (rental property, consulting, part-time clinical work). Keep skills current so returning to work is an option, not a crisis.

The upside: You optimize for the actual circumstances you encounter rather than a predicted scenario. You can take more risks because you have safety valves.

The downside: Requires ongoing attention and willingness to adjust. Can’t just “set it and forget it.” There’s also the psychological discomfort of uncertainty to contend with.

When 4% Makes Sense and When It’s Sketchy

The 4% rule works pretty well when:

• You’re retiring at 60+ (shorter time horizon reduces sequence risk)
• You have other income sources (Social Security, pension, rental income)
• Your spending is comfortable with meaningful discretionary components
• Markets aren’t at historical valuation extremes (CAPE ratio under 30)
• You’re covered by Medicare or have solved the healthcare puzzle

The 4% rule gets sketchy when:

• You’re retiring at 40 (50-year time horizon is way beyond what studies examined)
• Portfolio withdrawals are your only income source
• You’re already living super-lean with no fat to cut
• You’re retiring at peak market valuations
• Healthcare is 20%+ of your budget with uncertain coverage
• You have dependents with special needs or aging parents who might need support

For physicians specifically, the biggest risk is usually healthcare costs between retirement and Medicare eligibility. If you retire at 45, that’s 20 years of paying market-rate insurance with costs increasing faster than general inflation. Your 4% withdrawal at 45 might need to become 5% by 60 just to cover healthcare, even if everything else stays constant.

At the end of the day, we’re all here trying to engineer certainty where none exists using insufficient data to predict an unknowable future.

That doesn’t mean planning is worthless. It means planning should focus on resilience rather than precision.

Let’s take, for instance, a couple rigidly following 4% despite being able to afford more. They skip expensive bucket list trips year after year to preserve their portfolio. Twenty years later, their investments have performed great, but their health…hasn’t. They look back, wishing they’d spent more on experiences when they were physically capable of enjoying them.

The opposite problem exists too. People who spend recklessly can easily run out of money at 75.

But in my experience advising physicians, being too conservative is actually more common than being too aggressive.

And we didn’t go through medical training to die with $8 million that we were too scared to spend.

The Conclusion That Likely Won’t Satisfy

The 4% rule isn’t too frugal or too aggressive. It’s simply incomplete without your specific context.

For some physicians: Retire at 50 with 5%, accept the risk, enjoy youth and health while you have it.

For others: Work until 55 with 3%, prioritize security, and sleep-well-at-night peace of mind.

For many: Start with 4%, build massive flexibility, adjust as circumstances warrant.

But keep in mind that the penalty for over-conservatism exists in the form of working longer than necessary, and dying with money you could have enjoyed or given away while it mattered more.

My approach? Flexibility over precision. I’d rather adjust spending every few years based on reality than optimize for a predicted scenario that won’t happen anyway. I’d rather have the option to work part-time doing something interesting than the certainty I’ll never need to.

And most importantly, I’d rather spend the next several decades actually living rather than constantly recalculating safe withdrawal rates and running Monte Carlo simulations.

While the nerd in me loves to analyze 3.73% versus 4.28%, the realist in me knows that it doesn’t matter. So, I’ll be over here building flexibility into my plan and adjusting as I go.

I’d love to know: what are you actually optimizing for in retirement? Maximum portfolio value, maximum freedom, maximum experiences, or maximum security?