The 4% rule with 4% Treasury yields: with three-month Treasury bills yielding 4.13% on November 2, 2026, it can look as if a retiree could live on bill interest alone. But consumer prices rose 3.7% in the year to September, so that yield is barely above inflation. The more useful number is the real yield on Treasury Inflation-Protected Securities: 3.06% for 30 years on November 2, which implies a portfolio of TIPS could pay out about 5.1% of its starting value each year, rising with inflation, for 30 years before running out. High yields have made the 4% rule easier to fund safely, but only if you count inflation and accept spending principal.

What the 4% rule says

The rule comes from financial planner William Bengen's 1994 study of historical market returns. It holds that a retiree can withdraw 4% of a portfolio in the first year, then raise that dollar amount by inflation each year, with a high chance of the money lasting 30 years.

For a $1,000,000 portfolio, that means $40,000 in year one. If inflation runs at 3%, the year-two withdrawal is $41,200, and so on. The rule was built on a mix of stocks and bonds, not on Treasury bills.

Why 4% bill yields are not the same as a 4% withdrawal

At the November 2 three-month bill yield of 4.13%, $1,000,000 earns about $41,300 a year before tax. That looks like enough to fund a 4% withdrawal without touching principal.

The problem is inflation. If prices rise 3.7% a year, the same $1,000,000 buys less every year. Spending all the interest keeps the dollar balance flat while its value falls. The real return, after inflation, is roughly:

• (1 + 4.13%) ÷ (1 + 3.7%) − 1 ≈ 0.4%.

A retiree spending $41,300 of interest is in effect spending nearly all the return plus most of the inflation protection. After 10 years of 3.7% inflation, the untouched principal would buy about 30% less: 1 ÷ 1.037¹⁰ ≈ 0.70. Bills are an excellent place for the next few years' spending. They are not, on their own, a 30-year income plan.

The better benchmark: real yields on TIPS

TIPS principal rises with the Consumer Price Index, so their yield is quoted above inflation. Real yields from the Treasury's daily real yield curve on November 2, 2026:

• 10-year: 2.62%
• 20-year: 2.91%
• 30-year: 3.06%

A portfolio that holds TIPS maturing in each year of retirement, a ladder, can be designed to pay a level inflation-adjusted amount and run down to zero at the end. Using the standard annuity formula and a single real rate as an approximation:

• 30 years at 3.06% real: 0.0306 ÷ (1 − 1.0306⁻³⁰) ≈ 5.14% of the starting value each year.
• 20 years at 2.91% real: ≈ 6.67% a year.
• 30 years at 2.62% real, the 10-year rate: ≈ 4.85% a year.

On $1,000,000, the first figure is about $51,400 a year in today's dollars, adjusted upward with inflation, for 30 years. That is above the 4% rule's $40,000, with Treasury backing instead of market risk. The trade-off is that the money is gone after 30 years, and the calculation ignores taxes and the fact that real yields differ by maturity.

What this means for the 4% rule today

Real yields on 10-year TIPS fell below zero in 2012 and again in 2020 and 2021. In periods like those, a 4% inflation-adjusted withdrawal had to rely on stocks to do the heavy lifting. Today, a retiree can lock in a real rate above 3% on 30-year TIPS, which makes a 4% withdrawal far easier to cover from safe assets.

Three practical consequences:

• A retiree who wants certainty can cover essential spending with a TIPS ladder and keep stocks for growth and for heirs.
• A retiree who wants to preserve principal still needs a growth asset, because neither bills nor TIPS at today's real yields keep the full value intact while paying 4% a year.
• A retiree in a taxable account should check how TIPS inflation adjustments are taxed; changes in principal can affect federal tax each year, which is why TIPS are often held in an IRA.

Sequence risk: why the first years matter most

The biggest threat to the 4% rule is a market fall early in retirement, because withdrawals made from a shrunken portfolio lock in the loss. Two retirees with the same average return over 30 years can end up with very different outcomes depending on when the bad years arrive.

That is the case for holding a few years of withdrawals in bills or short Treasuries: in a bad year, you spend from the safe bucket and leave stocks to recover. Our guide to building a Treasury bill ladder shows how to stage that money, and our plan for a difficult 2027 works through a cash buffer with today's yields.

A hypothetical plan, with the numbers

Take a retiree with $1,000,000 who needs $40,000 a year, rising with inflation.

• Safe bucket: three years of spending, $120,000, in Treasury bills, earning about 4.1% at today's rates.
• Income floor: $500,000 in a TIPS ladder. At roughly 5.1% a year over 30 years, it pays about $25,700 a year in today's dollars.
• Growth bucket: the remaining $380,000 in a diversified stock portfolio, drawn on to refill the safe bucket in good years.

The floor covers almost two-thirds of the spending regardless of markets, and the bill bucket covers three years of the rest. These figures are illustrative. Your own plan depends on taxes, Social Security or pension income, and how much you want to leave behind.

Check your own withdrawal rate

The test is a single division: this year's planned withdrawals ÷ your portfolio's value × 100. A retiree withdrawing $45,000 from $900,000 is at 5.0%.

Compare that with what safe assets can support. At a 3.06% real yield over 30 years, a TIPS ladder can pay about 5.1% of its starting value, rising with inflation. A withdrawal rate well below that is comfortably fundable from safe assets; one well above it relies on stocks doing well, especially early on. Rerun the check each year, and before any large one-off withdrawal, since the rate only means something against the current balance.

Common mistakes

• Treating nominal yields as income you can spend. Inflation takes its share first.
• Locking long rates with short-term money. A 30-year TIPS sold early can lose value if real yields rise.
• Ignoring tax. All of the figures above are before tax.

To compare inflation-protected options, see I bonds vs TIPS at November 2026 rates. More is in Markets and on the front page.

FAQ

Is the 4% rule still valid in 2026?

It remains a reasonable starting point, and today's real yields make it easier to fund safely: 30-year TIPS yielded 3.06% above inflation on November 2, 2026. Personal circumstances, taxes and market conditions still matter.

Can I live off Treasury bill interest?

For a while, but at a 4.13% yield and 3.7% inflation, the real return is about 0.4%, so spending all the interest erodes your purchasing power over time.

What is a TIPS ladder?

A set of Treasury Inflation-Protected Securities maturing in successive years, each covering that year's spending. It provides a predictable, inflation-adjusted income backed by the U.S. government.

Who created the 4% rule?

Financial planner William Bengen, in a 1994 study of historical withdrawal rates.