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What is a “safe” retirement withdrawal rate?

In an investment portfolio, the withdrawal rate is the monetary percentage from which a retiree draws from his account each year.  A “safe” withdrawal rate is a fixed percentage distributed as a systematic withdrawal that reasonably expects portfolio funds to last throughout the retiree’s lifetime. When determining your personal retirement withdrawal rate, it’s important to include adjustments for inflation and the portfolio’s ability to generate earnings throughout a specific time frame, ensuring the account isn’t entirely depleted.

These are the basic parameters for calculating a “safe” withdrawal rate, but your specified rate can vary, depending on the total portfolio value, safeguards against market risk and inflation, living expense requirements and life expectancy. We’re here to help you determine your retirement withdrawal rate for your individual situation.

The “safe” withdrawal rate strategy was originally based on financial planner William Bengen’s research in the 1990s. At the time, a prevailing theory was if an investment portfolio generated an average annual return of 7 percent, then that was the percentage that could be withdrawn each year. However, Bengen introduced the “sequence of returns risk” concept, recognizing that an average annual return represents a series of higher and lower returns. If an individual experiences significantly low returns early in retirement, the portfolio would be too depleted to sustain a high withdrawal rate, even if that rate is justified by a higher average annual return during a 15-year time period. Bengen concluded at that time that 4 percent is generally considered a “safe” withdrawal rate.

Other financial advisors assert that if the returns sequence is favorable in early retirement, retirees could theoretically be able to increase their spending rate. In some scenarios, the 4 percent rule could even double or triple a retiree’s wealth by the end of retirement because his conservative withdrawal rate would not spend the bulk of his portfolio gains during that time period.

Another point to consider is that the original 4 percent guideline was based on retirees spending the same amount each year throughout retirement. However, recent research has shown that retirees tend to decrease spending as they get older. Based on this decreased spending premise, analysts have determined that the 4 percent rate could be underestimated by 0.32 to 0.75 percent. In other words, because spending tends to decrease throughout retirement, the “safe” withdrawal rate guideline may be closer to a 4.5 percent.

When developing a retirement withdrawal rate, remember that an investment portfolio should be sufficiently diversified to allow for growth opportunity paired with risk-mitigation financial vehicles.

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Danielle Christensen


Danielle is dedicated to serving clients to achieve their retirement goals. As a Paraplanner, Danielle helps the advisors with the administrative side of preparing and documenting meetings. She is a graduate of the College of St. Benedict, with a degree in Business Administration and began working with Secured Retirement in May of 2023.

Danielle is a lifelong Minnesotan and currently resides in Farmington with her boyfriend and their senior rescue pittie/American Bulldog mix, Tukka.  In her free time, Danielle enjoys attending concerts and traveling. She is also an avid fan of the Minnesota Wild and loves to be at as many games as possible during the season!