Retirement isn’t about pressing pause. It’s about stepping into the life you’ve worked for—whether that’s mornings overlooking the Pacific, weekend trips up the coast, or finally dedicating time to the causes and people that matter most.
But here in San Diego, where the sunshine is free but the lifestyle comes at a cost, your retirement income strategy is just as important as how much you’ve saved. That’s where the 4% Rule comes in—a simple, time-tested strategy that helps turn a lifetime of savings into an income stream you can rely on.
What Is the 4% Rule?
At its core, the 4% Rule about balance—living comfortably today while protecting your tomorrow.
Here’s how it works:
- In your first year of retirement, you withdraw 4% of your total savings.
- Every year after, you adjust that number to keep up with inflation and maintain your purchasing power.
For example, if you’ve saved $1 million, your first withdrawal would be $40,000. If inflation is 3% the next year, you’d adjust to $41,200. This strategy is designed to make your savings last for 30 years or more, even through market ups and downs.
Why the 4% Rule Works — and Where It Came From
In 1994, financial advisor William Bengen analyzed nearly seven decades of U.S. market history — including recessions, booms, and recoveries — to find a sustainable withdrawal rate. His research showed that a balanced portfolio (roughly 50–60% stocks, 40–50% bonds) paired with a 4% withdrawal rate could sustain a retiree’s income for at least three decades.
This wasn’t a theory built in perfect conditions. It was designed to withstand imperfect ones.
Why It Still Matters Today
Markets move faster. People are living longer. Costs—especially here in San Diego—are higher. And yet, the 4% Rule remains one of the most recognized retirement income strategies because it’s flexible. It’s not about one-size-fits-all; it’s about giving you a foundation you can adapt to your goals, your portfolio, and your lifestyle.
Adapting the 4% Rule for Life in San Diego
The 4% Rule works as a foundation, but it’s not one-size-fits-all. San Diego offers a lifestyle that’s hard to match, but it also means accounting for higher living costs in your plan. Here are a few ways to personalize the 4% Rule for your retirement:
- Lifestyle Vision
Whether it’s winters in Palm Springs, summers abroad, or simply enjoying everyday luxuries in San Diego, your goals help determine if 4% is the right pace or if it needs fine-tuning. - Portfolio Mix
Too conservative, and inflation erodes your buying power. Too aggressive, and market dips could disrupt your income. The right mix helps protect and grow your nest egg. - Market Awareness
In strong market years, you might withdraw a bit more. In leaner years, scaling back can protect your principal. Adjusting your withdrawals based on real performance (not just projections) helps protect your long-term wealth. - Inflation Adjustments
With San Diego’s cost of living often rising faster than the national average, annual adjustments are key to maintaining your purchasing power. - Safety Net
From home repairs to healthcare costs, life has a way of introducing surprises. A separate emergency fund lets you handle these without disrupting your planned withdrawals.
Smarter Ways to Strengthen the 4% Rule
The 4% Rule works best when paired with strategies that adapt to your life:
- Dynamic withdrawals that flex with the market.
- Bucket strategies that separate short-term cash from long-term growth.
- Guardrails that signal when to adjust spending to protect your portfolio.
These tools give your plan both resilience and room to grow.
Retirement Without Limits
The 4% Rule provides a way to transform the savings you’ve built into a lifestyle that works for you today while protecting your tomorrow.
If you’re ready to build a retirement income strategy that’s personal, adaptable, and built for the way you want to live, Mission Fed can help. Schedule your complimentary Retirement & Investment Consultation today and discover how to make your savings work harder for you.
The content provided in this blog consists of the opinions and ideas of the author alone and should be used for informational purposes only. Mission Fed Credit Union disclaims any liability for decisions you make based on the information provided. References to any specific commercial products, processes, or services, or the use of any trade, firm, or corporation name in this article by Mission Fed Credit Union is for the information and convenience of its readers and does not constitute endorsement, control or warranty by Mission Fed Credit Union.
