Personal FinanceCanva | RapidEye from Getty Images Signature and Narcisa Palici’s ImagesChris MacDonaldThis post may contain links from our sponsors and affiliates, and Flywheel Publishing may receivecompensation for actions taken through them. Retirement planning is a field that’s ever-evolving. Advice can change from decade to decade, and largely depends on a variety of factors the market dictates over time.One of the more important pieces of financial advice many advisors put forward is their idea of what the so-called “safe” withdrawal rate for retirees is. This rate, which has tended to fluctuate over time depending on various factors including expected stock market return and the interest rate on bonds, for example, has traditionally hovered around 4%.An interesting analysis completed by analysts at Morningstar actually suggested that the forward “safe” withdrawal rate may actually be sub-4% for 2025 onward, though some financial experts (Dave Ramsey comes to mind) have suggested that much higher withdrawal rates are not only possible, but favorable over time.As is the case with most pieces of conventional financial wisdom, there’s some truth behind each strategy. And which path retirees ultimately choose will depend upon a number of factors, including their risk tolerance and portfolio allocation setup.Let’s dive into the question of whether most retirees can sleep well at night with an 8% withdrawal rate from their retirement portfolio over time.Key Points About This Article:The percentage of one’s retirement portfolio they pull out each year in retirement can vary, depending on a number of factors.
A 4% withdrawal rate is generally considered to be safe by most financial experts, though some differ in their views.
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What Is the 4% Rule?24/7 Wall St4% rule visualThe visual above really does the 4% rule justice. Introduced by financial planner William Bengen in the 1990s, this guideline is one of the most-utilized by personal finance experts to help advise retirees on how much to pull from their portfolios each year in perpetuity.The thinking is that so long as investors pull 4% per year (with subsequent increases adjusted for inflation each year), one’s spending power and portfolio balance should have a high probability of lasting until one passes away. Now, since the market tends to provide returns of around 11% per year (the historical average over the past 100 years), there’s actually a pretty good likelihood that a retiree’s portfolio could actually grow over time with this modest withdrawal rate.But with the goal being to have these funds last the entirety of one’s lifetime (assuming one lives another 25-30 years past retirement age at 65), and factoring in some recessions and big bumps in the road along the way, it’s better to be safe than so
