Where the famous retirement withdrawal rule comes from, why its US assumptions travel badly to the UK, and what a real projection tests instead — tax, the State Pension, and the market sequences that actually broke retirements.
The 4% rule says: withdraw 4% of your portfolio in your first retirement year, raise it with inflation every year after, and a 60/40 portfolio would have lasted 30 years in almost every period of market history. It comes from William Bengen's 1994 work and the 1998 "Trinity study", both built on US stock and bond returns.
Three assumptions rarely survive the trip across the Atlantic. First, US market history: the American record is one of the strongest of any market — a rule calibrated to it is calibrated to optimism. Second, a 30-year horizon: retire at 60 and half of us need the money for longer. Third, and most practically: no tax and no other income. A UK retiree pays income tax on pension withdrawals beyond the personal allowance and tax-free cash, and receives a triple-locked State Pension from their late 60s — both change the arithmetic every single year.
The rule's real insight is that the order of returns matters more than the average. The historical failures cluster in two cohorts: retiring into the Great Depression, and — worse — retiring in the mid-1960s, straight into the 1966–81 inflation grind. Average returns over those windows were fine; the sequence was lethal, because early losses were compounded by inflation-swollen withdrawals.
A rule of thumb answers a question you can now answer properly. A year-by-year projection with your actual tax, your State Pension, your accounts and your spending pattern tells you what a fixed percentage cannot. Stress-testing that projection is what makes it honest: Hundred Summers runs your plan through thousands of simulated market paths (with fat-tailed returns and persistent inflation — the things that actually broke the 1966 cohort) and, separately, replays it through every rolling window of market history since 1928, so you can see exactly which historical starts your plan would and wouldn't have survived.