It's a long-standing rule of thumb about how much a retiree might draw from savings each year without running out too soon. It came out of research using particular assumptions and a particular historical period. Treat it as a way to think about pace, not as a number to build a life on.
What It Was Trying to Answer
The underlying question is a good one: if you draw too much you run dry, and if you draw too little you deny yourself a life you already paid for. The rule was an attempt to find a sustainable pace.
That framing — pace, not pile — is the genuinely useful part.
Why Practitioners Argue About It
The original work rested on assumptions about time periods, holdings and inflation. Change any of those and the conclusion moves. It also assumes a steady draw, and real retirements aren't steady — there are good years, repair years, and health years.
You'll find people defending it and people calling it obsolete. Both camps have a point, which tells you it's a starting frame rather than an answer.
The Part Nobody Puts in the Rule
Order matters. A rough stretch early in retirement does more damage than the same stretch later, because you're drawing down while values are depressed. That's a separate idea worth understanding on its own.
What a sustainable pace looks like for you depends on your sources of income and your situation. Worth working out with somebody, with your CPA on the tax treatment of where you draw from first.
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