Invite ye felawes and frendes desirous in gold to enter the gates of Shrewd'm, for they will thanke ye later.
- Manlobbi
Personal Finance Topics / Retirement Investing
No. of Recommendations: 6
What’s a Safe Retirement Withdrawal Rate for 2026?
Retirees can increase their spending power by taking a more flexible approach.
https://www.morningstar.com/retirement/whats-safe-...
Morningstar’s 2025 retirement income research suggests that 3.9% is the highest safe starting withdrawal rate for retirees seeking a consistent level of inflation-adjusted spending from year to year, assuming a 90% probability of having funds remaining at the end of an assumed 30-year retirement period. As in the past, we incorporated forward-looking asset-class return and inflation assumptions to arrive at a starting safe withdrawal rate for new retirees, excluding Social Security or other nonportfolio income sources.
...
In addition, new retirees don’t have to settle for such a low number—and arguably shouldn’t. Our research concluded that those who are willing to tolerate some fluctuations in their spending can start with a withdrawal rate of nearly 6%. The right level of flexibility in a retiree’s spending system will depend on the individual’s tolerance for spending changes, including the extent to which fixed expenses are covered by nonportfolio income sources.I'll be the richest man in the graveyard...
No. of Recommendations: 3
It's 4% for 30 years from a 60/40, stock/fixed income portfolio if you want to survive the 1929 stock market crash and Great Depression, or the high inflation of the 1970s and 80s.
If you don't happen to retire on the eve of the next stock market crash, you can increase either your spending or stock market allocation as the portfolio grows.
Better to be the richest man in the graveyard with lots of options for heirs or charitable beneficiaries than someone who lost half the value of the portfolio to fees, commissions, and professional management.
intercst
No. of Recommendations: 13
It's 4% for 30 years from a 60/40, stock/fixed income portfolio if you want to survive the 1929 stock market crash and Great Depression, or the high inflation of the 1970s and 80s.
Correction:
It WAS 4% for 30 years from a 60/40, stock/fixed income portfolio if you want to survive the 1929 stock market crash and Great Depression, or the high inflation of the 1970s and 80s.
It might be so in future as well, PROVIDED that real stock and bond yields on retirement date are comparable to the situation at the start of that historical period being examined. Which they aren't.
The sustainability of a portfolio and any withdrawal scheme is not a function of what was observed in the past, it's a function of the real future net earnings yields of the portfolio in question. Those can be approximated using the expected real bond yields and CAPE ratio at the start date. If real bond rates are low and CAPE high, success stories from the deep past should be of no comfort at all to those tempted to thing historical results are predictive.
You don't want to be in the position of a person who reasons thusly: "That guy bet on coin flips and won half the time, so I'll get the same win rate buying lottery tickets". Wagers with different odds get a different spread of outcomes.
Jim
No. of Recommendations: 3
{{ Correction:
It WAS 4% for 30 years from a 60/40, stock/fixed income portfolio if you want to survive the 1929 stock market crash and Great Depression, or the high inflation of the 1970s and 80s. }}
Right. Yet the article said that you can take a 6% withdrawal.
If you're worried about running out of money, your strategy ought to be at least survivable for the worst periods in the past.
None of us can predict the future.
intercst
No. of Recommendations: 9
it is 4% (ish, maybe 4.x%) for this allocation for a 30 year horizon. PhD economist Karsten Jaske (BigERN, as he's known online, being 6'7" and ERN = Early Retire Now) did a 50+ part treatment on his website of the crazily nitty gritty details of SWRs for longer horizons.
I'll save everyone the read (I made it through about 1/4 of his entries). If you want a 40-50+ year horizon, 3.25% is safe for like 90something percent survivability across Monte Carlo simulations.
Dr. Jaske's series is here -
https://earlyretirementnow.com/safe-withdrawal-rat... - and as he pulled off FIRE in his early 40s, he definitely has skin in the game.
No. of Recommendations: 6
There are endless debates about withdrawal rates, but it boils down to:
1) If you want to make periodic withdrawals from your portfolio for 30 years you need to pick some number, and the most widely accepted number is 4%.
2) That 4% number is based on historical data, but the worst thing to happen (e.g. great depression) wasn't the worst thing to happen until it happened.
No. of Recommendations: 7
There are endless debates about withdrawal rates, but it boils down to:
1) If you want to make periodic withdrawals from your portfolio for 30 years you need to pick some number, and the most widely accepted number is 4% ... based on historical data, but the worst thing to happen (e.g. great depression) wasn't the worst thing to happen until it happened.
You cannot blindly go with any fixed number. The problem with the 4% is that on average the final portfolio value after 30 years is TWICE the starting balance. A significant number of times the final value is FOUR times the starting balance.
You could be spending a lot more money than 4% most of the time. Half the time you could safely take 6%.
But even at 4%, there is a possibility of running out of money.
All that means that you need to have a plan to vary the amount you withdraw. Might as well couple that with a larger withdrawal rate, if you don't want to be the richest person in the graveyard.
I like Guyton-Klinger method, but there are many others.
