As far as I know, 7% actually is an inflation adjusted figure for overall market returns. Without inflation its nominally 10% per year. 7% is what MMM and most people use as an opportunity cost for their money when making calculations. Part of those calculations are that you invest that money and leave it alone year after year. The 4% rule comes into effect when you start taking withdrawals. Theoretically, if returns are 7%, why can’t we withdraw 7%? Well because if the market is down and you make withdrawals you are locking in losses each year that the market is down. It turns out 4% is low enough that even though you locked in a lot of losses in the down years, the gains on your reduced nest egg in the good years are good enough to sustain 4%. But in terms of opportunity cost calculations, pretty much everyone uses 7%.