In later analysis, Bengen applied a "floor-and-ceiling" withdrawal technique that reflected market conditions and how people would likely react to them. In bull markets, retirees could make withdrawals up to 25% greater than the initial withdrawal rate. In bear markets, withdrawals can decline as much as 10% less than the first-year rate.

Applying this method to a portfolio with 63% large-cap stocks and 37% intermediate-term government bonds, Bengen found that an initial withdrawal rate of 4.58% produced a 100% chance that the money would last for 30 years. At an initial rate of 5%, the portfolio had a 91% chance of lasting 30 years. At an initial rate of 5.25%, the odds decreased to 80%.

Bengen says he recommends a 4.5% to 5% initial withdrawal rate for most of his clients, with later adjustments in yearly withdrawal levels when market conditions require it. He suggests a 4% rate for conservative clients. "I get a little queasy and have to reach for the air bag when withdrawal rates get above 5%," he says.

Bengen's results are slightly more aggressive than a 1998 study conducted by three professors at Trinity University in San Antonio, Texas.  The Trinity study measured various withdrawal rates and asset allocation models between 1926 and 1995 to gauge how successful various rates were at sustaining portfolios over specified time periods.

When adjusted for inflation, 3% withdrawal rates on stock-heavy portfolios (between 50% and 100%) were 100% successful at maintaining assets for 30 years, while 4% withdrawal rates achieved success in the mid-to high-90% range depending on the stock allocation. A 100% bond portfolio had only an 80% success rate for 30 years.

These studies jibed with Harvard University research in 1973 that found that a 4% withdrawal rate on a portfolio with 50% stocks and 50% bonds-with subsequent withdrawals adjusted for inflation-could support its endowment fund without draining the principal.

So there it is: 4% or so seemed to be the magic number. Not so fast, though, because recent research ratcheted up the debate on withdrawal rates after certified financial planner Jonathan Guyton issued a paper last autumn that loosened the purse strings on retirement account spending.

By following a few rules, he says a portfolio with 80% stocks can support a 6.2% initial withdrawal rate while an allocation with 65% equities can sustain a 5.8% rate over 40 years. As for the rules, they are as follows: 1) Generate cash and rebalance a diversified portfolio by selling winning funds; 2) Cap annual withdrawal rates at 6% regardless of inflation; 3) Withdrawals aren't increased after a year of negative investment returns.

Guyton's research is based on the years 1973 to 2003, a period that included two nasty bear markets and a period of sustained high inflation. "I've had advisors tell me that for years they've had a hunch that the safe withdrawal rate was higher [than 4%-4.5%]," says Guyton, a principal at Cornerstone Wealth Advisors in Minneapolis.

Others aren't so sure. Kathleen Cotton, president of Cotton Financial Advisors in Lynnwood, Wash., recom-mends a 4% withdrawal rate for clients whose portfolios are less than half in equities. She provides more latitude for clients with at least 50% stocks, although she says she gets nervous when the rate gets up to 6%.