Tips and Tricks for Today and Tomorrow #13: How Much Can I Safely Withdraw in Retirement

Today I want to talk about a question that can be difficult to answer but often comes up for those nearing retirement: how much can I safely withdraw from my retirement accounts? It's a great question, because getting this right is a key part of building a successful long-term plan. Now, there isn't one simple answer that works for everyone. What feels safe for one person might feel risky to someone else. That's because your withdrawal strategy depends on so many personal factors: your age, income needs, market conditions, and other income sources.

Back in October of 1994, a financial planner named William Bengen published a study in the Journal of Financial Planning that introduced what we now call the 4% rule. And for those of you keeping score, yes, that was over 30 years ago, before I was even born. Bengen's research found that historically, a 4% annual withdrawal rate was safe for a retirement lasting 30 years. So if you retired with $2.5 million, you could withdraw about $100,000 per year and still have money left over in most historical scenarios. But here's the thing, that research was based on data and market conditions from the past. Since then, Bengen has updated his views, and so have many other retirement planning researchers and planners. Today, we know that your safe withdrawal rate might be higher or lower than 4% depending on your personal situation.

Let me give you a real-world example. We work with clients who retire at age 62 but don't plan to start taking Social Security until they're 67. In that case, we might design a plan where they withdraw 7% or even 8% or more of their portfolio for the first few years to fund their lifestyle. Then, once Social Security kicks in, their withdrawals might drop to around 3% or 4% going forward. They're choosing to spend a little bit more early on, and they're comfortable with having less later in life because they want to make the most of their active retirement years.

That's what makes this so personal. Your ideal withdrawal rate depends on your retirement age, when you start Social Security, how your portfolio is invested, how long you need your money to last, and your goals for yourself and your family. The most important thing I can tell you is this: your withdrawal rate should not be chosen in isolation. It needs to be part of a broader long-term financial plan. Yes, the 4% rule can be a helpful starting point, but it's not a personalized strategy. Your goals, your timeline, and your values matter.

That's why we build plans that are tailored to you, so you can feel confident not just when you retire, but for every year after. If you're thinking about how much you can withdraw in retirement and want to avoid guessing or worrying, let's build a plan that fits you. Thanks for watching.