What Would Ben Felix Say?
Two evidence-based tests on your numbers: the 5% Rule for whether renting or owning wins on unrecoverable costs, and the 2.7% Rule for a safe retirement withdrawal rate.
Not affiliated with or endorsed by Ben Felix. An educational interpretation of ideas he published in PWL Capital research notes (2021–2023). Not provided, reviewed, or approved by Ben Felix or PWL Capital Inc.
The 5% Rule, piece by piece
Each month's unrecoverable cost of owning, split into property tax, maintenance and cost of capital, next to the rent for the same home.
What each withdrawal rate pays out
Annual spending the portfolio supports at 2% to 4% and at your own rate, before tax, next to your target.
What the evidence would have you check next
What the number above rests on, and what would move it.
This is an educational tool, not financial advice, and it is opinion rather than statute. All verdict lines are respectful paraphrases in Ben Felix's evidence-first register, not real quotes. He is a practising Chief Investment Officer and Portfolio Manager at PWL Capital; nothing here is provided, reviewed, or approved by him or the firm. For advice about your own situation, speak with a qualified, regulated professional. If you are Ben Felix or represent them and want this changed or removed, email [email protected] and we'll act promptly.
How this is calculated
The 5% Rule (rent vs own)
The unrecoverable annual cost of owning is estimated as home value × (property tax % + maintenance % + cost of capital %), defaulting to 1% + 1% + 3% = 5%. The monthly break-even is that figure ÷ 12. If your equivalent monthly rent is below the break-even, renting and investing the difference tends to win on unrecoverable costs alone. Each component is adjustable above.
Source: PWL Capital, "Rent or Own Your Home? A Handy 5% Rule."
The case-for-renting score is 50 + (break-even − your rent) ÷ break-even × 100, held between 0 and 100. 50 is the break-even line; 43–57 means your rent is within 8% of it, close to a coin toss; 58 and up favours renting and 42 and below favours owning. Neither side is scored as a failure: the rule only compares the costs you never get back.
The piece-by-piece chart splits the break-even into its three monthly parts: home value × property tax % ÷ 12, home value × maintenance % ÷ 12 and home value × cost of capital % ÷ 12. Their total is the break-even rent. The cost of capital at which owning and renting cost the same is rent × 12 ÷ home value − property tax % − maintenance %; if that is below zero, tax and maintenance alone cost more than the rent.
The 2.7% Rule (safe withdrawal)
Safe annual spending = portfolio × withdrawal rate (default 2.7%, adjustable 2–4%). Required portfolio = desired annual spend ÷ rate. The rate sits materially below the 4% rule; a flexible 2–3% band is preferred for long horizons.
Source: PWL Capital, "The 2.7% Rule: Rethinking Safe Retirement Spending."
The plan sustainability score is the share of the required portfolio you hold, capped at 100: below 85 the plan is short (red), 85–99 is close (gold), and 100 means the portfolio covers the spend at your rate, to the half dollar. A full score turns green only when the spending is also no more than 3% of the portfolio, the top of the 2–3% band the evidence prefers; funded only at a higher rate, it stays gold. With no desired spend there is no plan to score, so the result shows the annual spend at your rate instead.
The withdrawal-rate chart applies the same formula, portfolio × rate, at 2%, 2.5%, 3%, 3.5% and 4% (the 4% rule) and at your own rate. The top bar is your desired spend: any rate whose bar is at least as long would pay for it, and desired spend ÷ portfolio is the rate your plan implies. All figures are before tax.
Why the 4% rule is treated with caution
Using roughly 2,500 years of returns across 38 developed countries (1890–2019), the 4% rule carried about a 17% chance of depletion for a 65-year-old couple.
Source: Anarkulova, Cederburg & O'Doherty (2023), "The Safe Withdrawal Rate: Evidence from a Broad Sample of Developed Markets."
His own free material
Ben Felix co-hosts the Rational Reminder podcast, where these ideas are discussed in depth for free: rationalreminder.ca.
What this does not model
No home price appreciation, rent inflation, leverage timing, taxes on withdrawals, sequence-of-returns simulation, or annuities. These are single-point comparisons meant to frame a decision, not to settle it.
Common questions
What is the 5% rule for renting versus owning a home?
It estimates the unrecoverable cost of owning a home at roughly 5% of its value per year: about 1% property tax, 1% maintenance, and 3% cost of capital. Divide that by 12 for a monthly break-even. If you can rent the equivalent home for less than that, renting and investing the difference tends to leave you better off on unrecoverable costs alone.
What is the 2.7% rule for retirement withdrawals?
It is a safe withdrawal rate materially below the classic 4% rule, closer to a 2–3% band, with about 2.7% cited for long horizons. Required portfolio is your desired annual spending divided by the rate; safe spending is your portfolio multiplied by the rate. Flexible spending beats a fixed rule.
Why not just use the 4% rule?
The 4% rule was derived largely from U.S. historical returns over 30-year horizons. Using roughly 2,500 years of returns across 38 developed countries (Anarkulova, Cederburg & O'Doherty, 2023), the 4% rule carried about a 17% chance of depletion for a 65-year-old couple, so a lower, flexible rate is more prudent.
Does the 5% rule mean renting is always better?
No. It isolates unrecoverable costs, money that is gone either way. Local prices, rent growth, leverage, time horizon, and behaviour all matter. The rule is a starting comparison, not a verdict.