If you are nearing retirement, one of the biggest questions is not just, “Have I saved enough?”
It is this:
How much can I actually take out each year without running out of money?
That question sounds simple. It is not.
For years, many retirees have heard about the 4% rule. The basic idea is that you withdraw 4% of your portfolio in the first year of retirement, then adjust that dollar amount each year for inflation. For example, if you retire with $1 million, the rule suggests an initial withdrawal of $40,000 in year one.
That can be a helpful starting point. But it should not be mistaken for a complete retirement income plan.
Your actual withdrawal rate depends on your age, health, spending needs, Social Security, pension income, tax situation, investment mix, market conditions, legacy goals, and how flexible you can be when life changes.
In other words, the better question is not, “What is the safe number?”
The better question is, “What withdrawal strategy fits my life?”
What Is a Safe Withdrawal Rate?
A safe withdrawal rate is the percentage of your retirement savings you can withdraw in the first year of retirement, then adjust over time, with the goal of making your money last for the rest of your life.
The phrase “safe withdrawal rate” can be misleading. No withdrawal rate is truly guaranteed. Market returns, inflation, healthcare costs, tax law, family circumstances, and longevity can all change the outcome.
That is why a withdrawal rate should be viewed as a planning estimate, not a promise.
Morningstar’s 2025 retirement income research suggests that 3.9% may be the highest safe starting withdrawal rate for retirees seeking steady, inflation-adjusted spending over a 30-year retirement period with a 90% probability of still having money left at the end of the period (Morningstar).
Charles Schwab’s research also shows that the right withdrawal rate can vary depending on time horizon and portfolio mix. For a 30-year retirement with a moderate allocation, Schwab estimated an initial withdrawal rate range of 4.2% to 4.8% for a 75% to 90% confidence level (Charles Schwab).
Those numbers are useful. But they are still averages and models.
Your retirement is not an average.
Why the 4% Rule Is Only a Starting Point
The 4% rule became popular because it gave retirees a simple framework. Simplicity is valuable, especially when you are trying to turn a lifetime of savings into a paycheck.
But there are several problems with relying on it too heavily.
First, the 4% rule was designed around a specific type of retirement: a roughly 30-year time horizon, a diversified investment portfolio, and annual inflation adjustments. If you retire early, live into your late 90s, carry concentrated investment risk, or face high healthcare costs, your situation may require a different approach.
Second, the rule does not automatically account for taxes. A $50,000 withdrawal from a traditional IRA is not the same as a $50,000 withdrawal from a taxable brokerage account or Roth IRA. What matters is not just what you withdraw, but what you keep after taxes.
Third, the rule does not adjust for real-life spending. Most retirees do not spend in a perfectly straight line. Travel may be higher in the early years. Healthcare costs may rise later. Some expenses disappear. Others show up unexpectedly.
Finally, the 4% rule does not solve the emotional side of retirement. It does not answer the question many retirees are really asking: “Will I be okay if the market drops?”
That is where retirement income planning becomes more personal.
The Real Risk: Bad Timing Early in Retirement
One of the biggest threats to a retirement income plan is called sequence of returns risk.
That is the risk that poor market returns arrive early in retirement, right when you begin taking withdrawals. The average return over 20 or 30 years may look fine on paper, but the order of those returns can make a major difference.
If your portfolio falls early and you keep withdrawing the same amount, you may be forced to sell more shares while prices are down. That leaves fewer shares available to recover when markets rebound.
J.P. Morgan Asset Management refers to this risk as “dollar-cost ravaging,” and notes that retirees can help address it by balancing risk early in retirement, using dynamic spending strategies, and considering protected income sources for stable expenses (J.P. Morgan Asset Management).
This is why the first several years of retirement matter so much.
If you retire into a strong market, your plan may have more room to breathe. If you retire into a weak market, rigid withdrawals can put pressure on the portfolio quickly.
The solution is not to avoid retirement or avoid investing. The solution is to build a withdrawal plan that knows what to do when markets are up, down, or sideways.
A Better Framework: Start With Your Income Floor
Before asking how much you can withdraw, start with a more basic question:
What does it cost to keep your life running?
This is your income floor.
Your income floor includes the non-negotiable expenses: housing, utilities, groceries, insurance, property taxes, healthcare, transportation, and basic living costs.
Then compare that number to your dependable income sources:
Social Security
Pension income
Rental income, if applicable
Part-time work, if desired
Annuity income, where appropriate
Other dependable income sources
The gap between your essential expenses and your dependable income is the first number your portfolio may need to support.
That is different from simply saying, “I have $1 million, so I can take 4%.”
The income floor approach asks, “What must be covered first?”
Once the essentials are covered, the rest of the portfolio can be organized more intentionally for lifestyle spending, inflation protection, long-term care planning, tax flexibility, and legacy goals.
Social Security Timing Can Change the Withdrawal Math
Social Security is one of the most important pieces of the retirement income puzzle.
Claiming earlier may reduce the pressure on your portfolio in the short term. Delaying may increase your monthly benefit later.
The Social Security Administration states that delayed retirement credits stop at age 70, meaning there is generally no benefit increase for waiting beyond that point (Social Security Administration).
For many retirees, the decision is not simply “claim early” or “claim late.” It is a coordination question.
Can your portfolio support a delay?
Is there a spouse who may rely on survivor benefits?
What is your health history?
How does your claiming decision affect taxes?
What happens if markets decline during the bridge years?
Your withdrawal strategy and Social Security strategy should be built together.
There is another reason Social Security should be treated as part of a broader retirement income plan rather than viewed in isolation. The Social Security Trustees currently project that, if Congress does not act, the Old-Age and Survivors Insurance Trust Fund would be able to pay full scheduled benefits until 2033, with continuing income sufficient to pay about 77% of scheduled benefits after that point (Social Security Administration). That does not mean a benefit reduction is certain, but it does mean retirees and pre-retirees should stress-test their income plans against the possibility of lower-than-projected Social Security benefits.
A strong retirement income plan should ask, “What happens if my benefit is delayed, reduced, taxed differently, or does not cover as much of my income floor as expected?”
Taxes Matter More Than Most Retirees Expect
Two retirees can withdraw the same amount of money and end up with very different after-tax income.
That is because retirement accounts are taxed differently.
Traditional IRA and 401(k) withdrawals are generally taxable as ordinary income. Roth IRA withdrawals may be tax-free if the rules are met. Taxable brokerage accounts may involve capital gains, dividends, interest, or return of principal.
Required minimum distributions also matter. The IRS says account owners generally must begin taking required minimum distributions from traditional IRAs and many retirement accounts when they reach age 73, although some workplace retirement plan participants may be able to delay RMDs until retirement if the plan allows and they are not 5% owners of the business sponsoring the plan (IRS).
That means your withdrawal plan should not only ask, “How much do I need this year?”
It should also ask:
Which account should the money come from?
How will this affect my tax bracket?
Will it affect Medicare premiums?
Should Roth conversions be considered before RMDs begin?
How do today’s withdrawals affect future flexibility?
A tax-aware withdrawal strategy can help turn the same portfolio into a more efficient retirement paycheck.
Why Flexibility Can Improve the Odds
One of the biggest mistakes retirees make is treating the withdrawal number as fixed forever.
Real life is not fixed forever.
A more flexible strategy may allow withdrawals to rise or fall based on markets, inflation, spending needs, and portfolio performance.
For example, if markets are strong, you may have more room for travel, gifts, or larger discretionary expenses. If markets are down, you may temporarily reduce discretionary withdrawals, draw from cash reserves, or avoid selling long-term investments at depressed prices.
Morningstar’s research found that retirees willing to tolerate some spending fluctuations may support a higher starting withdrawal rate than retirees who require the same inflation-adjusted spending every year (Morningstar).
This is why I often tell clients that the goal is not to find one magic number.
The goal is to build a system that can adapt.
Questions to Ask Before Choosing a Withdrawal Rate
Before you settle on a retirement withdrawal rate, ask these questions:
What are my essential monthly expenses?
Separate your must-have spending from your nice-to-have spending. Essential expenses need a different level of dependability than travel, gifts, hobbies, and lifestyle upgrades.
How much dependable income will I have?
Add up Social Security, pensions, rental income, and other reliable income sources. Then identify the gap your portfolio needs to fill.
How long might retirement last?
A 62-year-old retiree and a 73-year-old retiree may need very different withdrawal strategies. Longevity is not just a risk. It is one of the central planning assumptions.
How flexible is my spending?
If you can adjust spending during bad markets, your portfolio may have more room to recover. If every dollar is fixed, the plan needs more protection.
What accounts will I withdraw from first?
The order of withdrawals can affect taxes, RMDs, Roth conversion opportunities, Medicare premiums, and legacy planning.
What happens if the market drops in year one?
Every retirement income plan should be stress-tested against early losses. If the plan only works in average markets, it is not finished.
The Bottom Line
So, how much can you safely withdraw in retirement?
For many retirees, 4% may be a reasonable starting point for discussion. Some people may need less. Others may be able to withdraw more, especially if they have flexible spending, dependable income sources, shorter time horizons, or a well-structured plan.
But the real answer is not found in a rule of thumb.
It is found in a coordinated retirement income strategy that accounts for your expenses, taxes, Social Security, investments, healthcare, family goals, and risk tolerance.
At Genesis Wealth Advisor Group, we help clients think through these decisions as part of a broader retirement income planning process. For people still working, that may also include reviewing how their current workplace plan fits into the future paycheck strategy through 401(k) help for employees. For families with more moving pieces, it may become part of a more coordinated Genesis Premier Virtual Family OfficeTM conversation.
Your retirement savings should not feel like a pile of money you are afraid to touch.
It should feel like a system.
And the right system can help turn savings into a paycheck.
Quick FAQ
Is the 4% rule still useful?
Yes, but only as a starting point. The 4% rule can help frame the conversation, but it does not replace a personalized retirement income plan.
Is 3.9% safer than 4%?
Not automatically. Morningstar’s 3.9% estimate is based on specific assumptions, including a 30-year retirement period, steady inflation-adjusted spending, and a 90% probability of success (Morningstar). Your number may be higher or lower depending on your situation.
Should I withdraw from my IRA, Roth IRA, or taxable account first?
It depends on your tax bracket, income needs, RMD timeline, estate goals, and other sources of income. A tax-aware withdrawal strategy can help coordinate these decisions.
What is sequence of returns risk?
Sequence of returns risk is the danger of experiencing poor investment returns early in retirement while you are taking withdrawals. Early losses can be especially damaging because withdrawals from a declining portfolio leave fewer assets available for recovery.
Can Social Security affect how much I withdraw?
Yes. Social Security timing can affect how much you need from your portfolio, how long your portfolio must bridge the gap, and how your retirement income is taxed.
What is the first step?
Start by calculating your income floor: the amount you need each month for essential expenses. Then compare that number to your dependable income sources. The gap becomes the starting point for your withdrawal strategy.
Scott E. Jones, BFA™, CPFA®, CRPC®, RFC® is the founder of Genesis Wealth Advisor Group, LLC, specializing in retirement income planning, 401(k) management, and wealth strategies for affluent and high-net-worth individuals.
This article is for educational purposes only and does not constitute personalized financial, tax, or legal advice. Please consult with a qualified professional before making any financial decisions.