John Montgomery Challenges the 4% Rule: Why One CEO Says Retirees Should Withdraw Just 2.8%

John Montgomery, founder and CEO of Bridgeway Capital Management, has challenged the longstanding 4% rule for retirement withdrawals by advocating a far more conservative approach: a 2.8% annual spending rate measured from the market’s last major peak, paired with an aggressive 90/10 stock/bond portfolio.

This stance, shared in mid-August 2026, directly rebuts recent guidance from Bill Bengen, the financial planner who originated the 4% rule in 1994. Bengen had recently raised his recommended starting withdrawal rate to at least 4.7% (and suggested higher rates could work under current conditions), while favoring a more balanced allocation such as roughly 65% stocks, 30% bonds, and 5% cash.

Background on the 4% Rule

The 4% rule emerged from Bengen’s historical analysis of U.S. market returns. It suggested that retirees could safely withdraw 4% of their portfolio’s value in the first year of retirement and then adjust that dollar amount upward for inflation each subsequent year, with a high likelihood that the money would last at least 30 years—even through severe downturns such as the Great Depression or 1970s stagflation. The original work often assumed a stock-heavy but not extreme allocation (around 50–75% equities). Over time it became a widely cited rule of thumb, though researchers and advisors have long debated whether it is too conservative or too aggressive depending on expected returns, sequence-of-returns risk, inflation, and individual circumstances.

Bengen’s recent updates reflect more optimistic conditions and a desire to help retirees avoid underspending out of excessive fear of running out of money. He has argued that such fear can dominate retirement thinking and prevent people from enjoying the fruits of decades of saving.

Montgomery’s Alternative Framework

Montgomery recommends withdrawing just 2.8% of portfolio value, calculated from the most recent major market peak rather than the current portfolio value or the starting balance at retirement. He pairs this with a high-equity allocation: 90% stocks and only 10% bonds even during retirement.

He projects that a 90/10 portfolio can deliver about 6.5% inflation-adjusted returns, compared with roughly 4.8% for a traditional 60/40 mix. The higher expected growth comes with greater volatility, which is why the withdrawal rate is set so low. According to Montgomery, the 2.8% rate (anchored at the last peak) is designed so that a retiree can maintain the same dollar spending for five consecutive years without lifestyle cuts, provided stocks do not fall more than 30%—an extreme historical outcome.

Key claimed advantages include:

Spending stability during downturns: Because the rate is measured from a prior peak and kept low, spending power is less likely to force reductions when markets decline (unlike a fixed percentage of a fluctuating current portfolio value).

Frequent “raises”: Stocks reach new highs in roughly seven out of ten years on average, potentially allowing spending increases when markets recover or advance.

Long-term portfolio growth: The combination is intended to leave the portfolio larger than its starting value over a long retirement rather than depleting it.

Buffer against longevity and legacy goals: Montgomery, age 70 at the time of the comments, noted actuarial life expectancy figures while pointing out that his own mother reached 103. He views some residual fear of outliving savings as healthy and values the ability to leave money for family or charitable causes.

Contrasting Philosophies

The two approaches highlight different priorities. Bengen’s updated guidance leans toward maximizing enjoyment of retirement savings and cautions against chronic underspending. Montgomery prioritizes extreme durability, growth potential through high equity exposure, and optionality for longevity or bequests. He explicitly pushes back on “Die With Zero”-style thinking that encourages spending down assets completely.

Critics of very low fixed rates often note that they can lead to unnecessarily frugal lifestyles or large unspent balances. Supporters of flexible or higher rates emphasize that sequence risk, valuations, personal spending flexibility, Social Security timing, and partial annuitization can matter as much as any single percentage. Recent research has also explored alternatives such as combining withdrawals with partial annuities or delayed Social Security claiming for better outcomes under certain assumptions.

Practical Takeaways

Montgomery’s challenge underscores that the “safe” withdrawal rate is not a universal constant. It depends on asset allocation, how withdrawals are calculated (current value vs. peak vs. initial balance), willingness to adjust spending, risk tolerance, health and longevity expectations, and goals around legacy or charity. A 2.8% rate from market peaks with 90% equities is unusually conservative on the spending side and aggressive on the investment side. It may suit investors who prioritize never running out and continuing portfolio growth, while others may prefer higher starting rates with greater flexibility or more balanced portfolios.

How to Become Rich by Mindset

Most people chase money through tactics—side hustles, stock tips, real-estate deals, or the latest online course. Those tools matter. But the people who actually build lasting wealth usually share something more fundamental: a specific way of thinking about money, opportunity, value, and themselves. Mindset is not magic. It is a set of beliefs and habits that shape decisions, persistence, and results over years.

Here is a practical framework for developing the kind of mindset that supports wealth creation.

1. Shift from Scarcity to Abundance

A scarcity mindset treats money, opportunity, and success as limited pies. Someone else winning feels like your loss. This leads to envy, risk avoidance, and short-term thinking.

An abundance mindset sees value as expandable. You can create more of it. Other people’s success becomes evidence that it is possible and often a source of ideas or partnerships. This shift does not mean ignoring competition or pretending resources are infinite. It means focusing on creation rather than division.

Practical move: When you feel envy or fear of missing out, pause and ask, “What can I learn or create from this?” Train the reflex.

2. Treat Money as a Tool, Not a Score or a Moral Statement

Many people carry emotional baggage around money—guilt about wanting it, fear of losing it, or the belief that rich people are somehow worse. These feelings distort decisions.

Wealthy people tend to view money as neutral leverage: a way to buy time, options, security, and the ability to solve bigger problems. They separate self-worth from net worth. Failure in a deal does not equal personal failure.

Practical move: Track your emotional reactions to money conversations or bank balances. Notice when fear or pride is driving the choice rather than logic and long-term goals.

3. Focus on Value Creation Before Extraction

The fastest path to resentment and stalled progress is trying to get rich by taking from others. Sustainable wealth usually comes from solving problems people will pay to have solved—better products, clearer information, saved time, reduced risk, or increased status and pleasure.

Ask regularly: “What problem am I solving, and for whom?” The bigger and more painful the problem you reliably solve, the more the market rewards you.

4. Embrace Delayed Gratification and Compounding

Most wealth is built through repeated small advantages that compound. That requires the ability to forgo immediate pleasure or status for larger future payoffs. This applies to saving and investing, skill-building, relationship-building, and reputation.

People with a short time horizon optimize for today’s dopamine. People with a long time horizon optimize for optionality five or ten years out.

Practical move: Before major spending or career decisions, ask what the decision looks like in three years and in ten. Write it down.

5. Take Extreme Ownership of Outcomes

A victim mindset—“the economy, my boss, my background, the algorithm”—feels protective in the moment but freezes action. High-agency people assume that whatever happens, their response is the variable they control.

This does not mean blaming yourself for everything. It means treating external obstacles as data and constraints rather than excuses. The useful question is almost always “Given this reality, what is my next move?”

6. Build a Growth Orientation Toward Skills and Identity

Fixed-mindset thinking says, “I’m not a money person / not entrepreneurial / not good with numbers.” Growth-mindset thinking treats skills as trainable. Intelligence, sales ability, financial literacy, and emotional regulation can all improve with deliberate practice.

Identity matters here. People who see themselves as “someone who builds valuable things” or “someone who learns fast” behave differently from people who see themselves as victims of circumstance.

7. Manage Risk Intelligent, Not Fearfully

Avoiding all risk is itself a high-risk strategy in a changing economy. Calculated risk—bounded downside, asymmetric upside, reversible decisions where possible—is how most significant wealth is created. The goal is not recklessness; it is accurate risk assessment and emotional tolerance for uncertainty.

8. Surround Yourself with Better Defaults

Mindset is contagious. Spend enough time around people who talk only about constraints and unfairness, and those frames become normal. Spend time around people who ship work, invest, and solve problems, and higher standards start to feel ordinary.

You do not need to abandon old friends. You do need deliberate exposure to higher standards of thinking and execution.

Common Traps

Confusing motivation with systems. Feeling inspired for a week is not the same as consistent daily and weekly actions.

Obsessing over “mindset” while avoiding hard skill acquisition and market feedback.

Using positive thinking as a substitute for facing real numbers—cash flow, margins, opportunity cost.

Waiting to feel ready or confident before acting. Confidence usually follows competence and small wins.

Putting It Together

A wealth-supporting mindset is not a single affirmation. It is the combination of:

Seeing value as creatable rather than fixed

Treating money as a tool

Prioritizing long-term compounding

Taking ownership of responses

Continuously upgrading skills

Accepting intelligent risk

None of this guarantees riches. Markets, luck, health, and timing still matter. But without these mental habits, even good opportunities are often mishandled or abandoned. With them, ordinary opportunities compound and larger ones become visible and actionable.

Start with one area where your current thinking is clearly limiting you—scarcity around money, avoidance of skill gaps, or short-term emotional decisions. Change the internal narrative and the daily behavior that follows it. Track results over months, not days. The external numbers tend to follow the internal operating system more reliably than most people expect.

Before Overseas Investment, You Must Consider Inheritance Tax and Capital Gains Tax

In an era of increasingly global asset allocation, many investors direct capital toward U.S. equities, European real estate, Asian emerging markets, or offshore funds in pursuit of higher returns and diversification. However, overseas investing is not solely about expected returns and liquidity. Inheritance tax (Estate/Inheritance Tax) and capital gains tax (Capital Gains Tax) are often the most overlooked yet potentially wealth-eroding hidden costs. Without proper advance planning, heirs may face double taxation, complex cross-border procedures, or even frozen assets.

1. Inheritance Tax: The “Invisible Tax” After Death

Inheritance tax is levied on the assets left by a deceased person. Systems vary widely across countries, with the key differences lying in the “taxable subject” and “exemption amounts.”

The United States is the most classic “trap”

For non-U.S. tax residents (Non-Resident Aliens, or NRAs), the U.S. imposes federal estate tax only on “U.S.-situs assets.” The exemption is a mere USD 60,000 (unchanged for inflation since 1976), with amounts above that subject to progressive rates ranging from 18% up to a maximum of 40%.

What counts as U.S.-situs assets? Shares of U.S. publicly listed companies, U.S.-registered ETFs (such as SPY or QQQ), and U.S. real estate—regardless of whether the account is held in Taiwan, Hong Kong, or Singapore, as long as the stock is issued by a U.S. company, it falls within the taxable scope. Taiwan, Hong Kong, and mainland China have no estate tax treaties with the United States, so the same U.S. stocks may be taxed once by the U.S. and again by the home country (e.g., 10%–20% in Taiwan) without automatic credit.

Overview of other countries

Japan can reach as high as 55%, South Korea 50%, France 45%, and the UK 40%.

Hong Kong, Singapore, the UAE, Australia, Canada, and New Zealand have no inheritance tax (Canada has no inheritance tax but treats death as a deemed disposition that may trigger capital gains tax).

Some countries use a “beneficiary taxation” model, with rates varying by relationship to the deceased.

In practice, directly holding U.S. stocks in overseas brokerage accounts often requires heirs to complete U.S. probate procedures and file Form 706-NA—lengthy and costly processes. While using a local intermediary (complex order routing) may simplify inheritance formalities, the legal estate tax obligation does not disappear.

2. Capital Gains Tax: The “Profit Tax” on Sale

Capital gains tax is levied on the profit from the difference in asset value upon sale. Overseas investors often mistakenly believe that “non-residents are not taxed,” but in reality most countries still tax real estate gains, while treatment of stocks varies.

Real estate is taxed almost worldwide: approximately 19% for non-residents in Spain, 18%–24% on UK residential property, 28% for non-residents in Portugal, and up to 25% (or around 30% of net gain) in Mexico.

Stocks and funds: The U.S. generally does not impose capital gains tax on non-residents (though dividends are subject to withholding tax); individual investors in Hong Kong, Singapore, and the UAE are usually exempt; some European countries apply higher rates.

Double taxation issues: If the home country taxes worldwide income (e.g., Taiwan’s inclusion of overseas income in the alternative minimum tax, or the U.S. citizenship-based taxation), the same gain may be reported in both places, requiring foreign tax credits or tax treaties for relief.

Additionally, some countries treat death as a “deemed disposition,” immediately triggering capital gains tax that stacks on top of inheritance tax, resulting in a potentially heavy combined burden.

3. Why Must These Be Considered Before Investing?

High risk of double taxation: Both the home country and the investment destination may tax the same assets, and without a treaty there is no automatic offset.

Practical difficulties in inheritance: Cross-border notarization, translation, court procedures, and foreign exchange controls can take years, during which assets may be inaccessible.

Tax rules change frequently: Exemption amounts, rates, and domicile determination rules can be adjusted (for example, the UK’s recent shift toward a residence-year-based test).

The CRS information exchange era: Overseas account balances and income data are now highly transparent, significantly increasing the risk and penalties of under-reporting.

4. Practical Planning Directions (For Reference Only, Not Individual Advice)

Understand asset “situs” determination: U.S. stocks may be treated as U.S. assets regardless of where they are held; shares of foreign companies or Ireland-registered UCITS ETFs are generally not considered U.S.-situs.

Structural arrangements: Some investors hold assets through offshore companies or trusts so that what is directly owned at death becomes “shares of an offshore company,” potentially reducing U.S. estate tax exposure (but CFC rules, anti-avoidance provisions, and home-country tax implications must be carefully considered).

Control position size and cash flow: Keep high-risk assets of a single country within exemption limits and maintain sufficient liquid funds to cover potential tax liabilities.

Life insurance: U.S. life insurance death benefits are generally not treated as U.S.-situs assets and can serve as a source of liquidity for estate taxes.

Seek professional advice early: Cross-border tax matters involve the laws of both the home country and the investment destination, domicile determination, and treaty application. Planning should be conducted jointly by accountants and lawyers familiar with both jurisdictions.

Conclusion

The appeal of overseas investment lies in opportunity and diversification, but the ultimate goal of wealth is effective intergenerational transfer. Inheritance tax and capital gains tax are not issues to be addressed after the fact—they form part of the investment decision itself. Before placing an order, ask yourself three questions:

Which countries will tax these assets upon death, and what are the exemption amounts?

How will capital gains be taxed upon sale in both the investment destination and the home country, and are tax credits available under a treaty?

Do the heirs have the capability and willingness to handle cross-border procedures?

Only by incorporating “tax” into a complete asset allocation and succession blueprint can overseas investment truly become a foundation of generational wealth rather than a potential tax minefield. Investors are strongly advised to consult professionals with cross-border expertise before taking action and to tailor planning to their nationality, residence, and asset types.

Disclaimer

The content of this article is provided for general information and educational purposes only and does not constitute investment, tax, legal, or financial advice of any kind. Tax laws of various countries are complex and depend on an individual’s nationality, residence, asset type, and holding structure; actual applicability may differ. Readers should not rely solely on this article to make any investment or succession decisions. They should consult qualified professional accountants, lawyers, or tax advisors and exercise independent judgment based on their own circumstances. The author and publishing platform accept no liability for any direct or indirect losses arising from the use of the information in this article.

Reminder on Policy Change Risks

Inheritance tax, capital gains tax, exemption amounts, tax rates, domicile determination rules, tax treaties, and anti-avoidance provisions in various countries may be adjusted at any time due to legislation, budgets, international agreements, or administrative interpretations. The tax rates, exemption amounts, and institutional details mentioned in this article are based on publicly available information at the time of writing and may undergo significant changes in the future. Investors should continuously monitor the latest regulatory developments in relevant countries and regularly review whether their asset allocation and succession plans remain compliant with current rules.