This Retirement Rule of Thumb Has Changed - Most Retirees Haven't Caught On

Many retirees work hard to save and invest in a retirement plan during their working years. However, most people don't think about a withdrawal strategy until they're already in retirement. It can be stressful choosing a withdrawal amount too, because retirees have to balance paying for their lifestyle now, while also leaving enough invested to provide income for them for decades to come.

Below, we'll explain the most common retirement withdrawal rule that many financial advisors still use today, along with some updated research that shows many retirees should withdraw a slightly lower amount than previously thought.

The most common withdrawal strategy: The 4% rule

In 1994, the Journal of Financial Planning published an article that would eventually become one of the most followed strategies for retirement withdrawals. Created by financial planner William Bengen, it's called the 4% rule. The 4% rule recommends that retirees withdraw 4% of their portfolio in the first year of retirement and then adjust that amount each year, depending on inflation. Bengen said that if retirees follow this rule, their nest egg is likely to last 30 years. 

Though no formula can guarantee that a nest egg will last, as the market will consistently go through dips and increases, it's a guideline that can help retirees formulate a plan for their golden years.

New research says a 3.9% withdrawal rate may be more prudent

Morningstar recently recommended a withdrawal rate of 3.9%, up from 3.7% in 2025. Morningstar bases its rate on a 30-year retirement. Morningstar regularly updates its recommendations, and retirees should evaluate their own needs and decide which withdrawal rate is best for them.

Bengen raised his original withdrawal rate to 4.7%

Interestingly, while some financial companies have recommended a lower withdrawal rate, Bengen recently raised his recommended guideline to 4.7% after he added more asset classes to his example portfolios. Of course, each person will have a different portfolio, asset mix, and method of determining how much money they'll need in retirement. So, it's common for people to get different results and recommendations depending on their personal finances.

To give an example of what this might look like, if someone has a million-dollar portfolio, a 4% withdrawal rate would mean withdrawing $40,000 a year, whereas a 3.9% withdrawal rate would mean withdrawing $39,000 a year.

A lower withdrawal rate isn't necessarily bad news

Morningstar recommending a 3.9% withdrawal rate isn't necessarily bad news. Rather, it's another guideline people can choose to follow or not depending on their own risk tolerance. Morningstar and Bengen present different expert opinions based on their own individual analyses of the market and retirement projections. How conservative someone wants to be with their retirement withdrawals depends on their personal preferences, lifestyle choices, portfolio, and market performance.

A solid retirement also involves conscious spending

Although many people place a strong emphasis on withdrawal rate, it's also important to have a solid spending plan. Minimizing high-interest debt, tracking expenses, and maintaining a solid emergency fund can go a long way in helping the longevity of a 30-year retirement plan. Additionally, planning for high expenses in the future, like healthcare costs, can ensure retirees are prepared not only for their bills today but also for future large expenses.

The right withdrawal rate will depend on the individual

Ultimately, the right withdrawal rate for an individual in retirement will depend on how long their retirement is and the amount they have saved. Their Social Security income, asset mix, and other income sources will also help determine the safest withdrawal rate for them.

Retirees can revisit their withdrawal plan every year

Although retirement is supposed to be a time for relaxation, it's more important than ever to revisit your withdrawal plan year after year. Instead of locking in a fixed rate or setting up an automatic withdrawal for the same amount each year, revisit your retirement plan regularly. Use a withdrawal calculator to determine whether it's a safe amount or consult a financial advisor if you have questions. Switching to a fixed income from a salary can be a big transition for many retirees, so getting a second opinion with a financial planner can help.

Bottom line

Ultimately, if you want to meet your retirement goals, it's important to stay flexible with your withdrawal strategy, rather than relying on a fixed rate that you adhere to every year. The first few years of retirement are the most important when it comes to carefully considering a withdrawal strategy that will help preserve your nest egg for decades to come. So, take time deciding how much to withdraw in your first year and work with a financial planner if you need help or have questions.