Morningstar’s 2025 research recommends a 3.7% starting safe withdrawal rate for new retirees seeking to maintain a consistent, inflation-adjusted income over a 30-year period, representing a decrease from previous, higher recommendations due to anticipated market volatility and lower expected returns. This 3.7% rate assumes a 90% probability of success.
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.
In recent years, it has led new retirees to be advised to withdraw less than 4% to reduce their risk. This included research published in 2021 that recommended a 3.3% safe withdrawal rate (for 2022), and in December 2025, when 3.9% was announced as the optimal rate for those retiring in 2026.
Morningstar's 2025 “State of Retirement Income” research recommends a starting safe withdrawal rate of 3.9% for those looking for a steady level of inflation-adjusted spending each year, up from 3.7% last year.
Withdrawal rates considered safe or sustainable vary from 3 percent to more than 6 percent, while optimal asset alloca- tions range from 50 percent to 100 percent stock.
The "7 withdrawal rule" in retirement planning suggests taking out 7% of your savings in the first year, then adjusting for inflation annually, offering more income early but with higher risk than the traditional 4% rule, being potentially better for shorter retirements or risk-tolerant individuals who want more spending power upfront, though it's less sustainable long-term for a standard 30-year retirement. It's a guideline, not a guarantee, and its success depends heavily on market performance, individual health, and lifestyle, with some financial experts recommending more conservative rates or adjusting based on personal needs.
In the past few years, the internet has been abuzz in the financial planning community regarding financial wellness and planning guru Dave Ramsey's vaunted 8% proposed withdrawal rate.
Roughly 7% to 9% of American households have $500,000 or more in retirement savings, though figures vary slightly by source, with data from late 2025 suggesting around 7.2% and older 2022 data indicating about 9%, showing it's a significant milestone achieved by less than one in ten families, despite higher averages driven by wealthy individuals.
Delaying Social Security until 70 can yield a larger benefit amount, and some retirees may have pension income they can count on as well. While conservative models place a safe withdrawal rate for older retirees between 4.5% and 5%, Bengen suggests that you could potentially withdraw up to 5.5% without increasing risk.
That research has led him to revise the 4% figure upward to 4.7% Even so, according to Bengen's studies throughout his career, the average safe withdrawal rate over the past 100 years has been around 7%. “It's designed as a rule for the person who doesn't want to be worried about anything that may occur,” says Bengen.
And to go one step further, we recommend dividing your mutual fund investments equally between four types of funds: growth and income, growth, aggressive growth, and international.
One frequently used rule of thumb for retirement spending is known as the 4% rule. It's relatively simple: You add up all of your investments and withdraw 4% of that total during your first year of retirement. In subsequent years, you adjust the dollar amount you withdraw to account for inflation.
If you are looking for comprehensive financial management, in general you should expect to pay about 1%. The second is a representative fee for a well-indexed S&P 500 fund. If you are only looking for investment management, someone to grow your portfolio, this is the number they need to compete with.
Yes, you can live off the interest/returns from $500,000, but it depends heavily on your lifestyle and expenses, with the common 4% rule suggesting about $20,000 annually, which may require a frugal lifestyle, relocation, or significant Social Security income to supplement. With smart investing (e.g., balanced stock/bond mix) and minimal spending, it's feasible for many, but living in a high-cost area or with high expenses would make it difficult.
For years, financial advisors have drilled the so-called "safe withdrawal rate" into the heads of retirement planners. The rule of thumb? Live on 4% of your nest egg per year, and your money should last. Some even say 3% is safer.
The top ten financial mistakes most people make after retirement are: