Key Takeaways
- A common starting point is spending about 4% of your savings in your first year of retirement, then giving yourself an inflation raise each year after. Morningstar’s 2026 research puts the safe starting number a touch lower, at 3.9%, for a 30-year retirement.[1]
- That 4% figure is a sanity check, not a plan. Your real number depends on your other income, your taxes, your investment mix, and how long the money has to last.
- Retirees who stay flexible, spending a little less after a down year and a little more after a good one, can often start higher, up to about 5.7% in Morningstar’s models.[1]
- The most common mistake is picking one number and never revisiting it. A safe spending rate is a pace you adjust, not a dial you set once and forget.
- Quick gut check: multiply the yearly income you want from savings by 25. That’s roughly the nest egg that supports it at a 4% start.
Here’s the short version. Most retirees can safely start by spending around 4% of their savings the first year, then adjusting that amount up for inflation each year after. Morningstar’s latest research nudges that starting number to 3.9% for 2026.[2] But the honest answer is that no single percentage fits everyone. The smartest plans treat that number as a starting line you adjust over time, not a rule carved in stone.
Where does the 4% rule come from?
A safe starting point is about 4% of your portfolio in year one, adjusted for inflation after that. A financial planner named William Bengen introduced this “4% rule” back in 1994, after testing how retirees would have held up through every rough market stretch in modern history.[4] The idea was simple: start at 4%, raise it with inflation, and your money had a strong chance of lasting at least 30 years.
In my book Your Fiscal Physical, I use a quick cousin of that rule. Take the yearly income you want from your savings and multiply by 25. Want $80,000 a year from your portfolio? You’re in good shape somewhere near $2 million! It’s a fast gut check, not a full plan, but it gets you in the right ballpark.
Is the 4% rule still safe in 2026?
It’s still a reasonable place to start, but today’s best research lands a little lower. Morningstar’s 2026 State of Retirement Income report puts the safe starting withdrawal rate at 3.9% for a portfolio holding 30% to 50% in stocks, built to last a 30-year retirement about 90% of the time.[1] That’s actually up from 3.7% the year before, after Morningstar updated its long-term outlook for returns and inflation.[3]
On $2 million, 3.9% is $78,000 in year one. The classic 4% is $80,000. Not a huge gap. And here’s a fun twist: the rule’s own creator, William Bengen, has since said many retirees can start higher, closer to 4.7%, in his newer research.[4] So why the wide range? Because the right number leans on things a simple rule can’t see: your other income, your taxes, your investment mix, and your timeline. Morningstar notes that stretching a plan from 30 years to 35 years drops the safe start from 3.9% to about 3.5%.[3]
Should your safe spending rate flex or stay fixed?
The number you start with matters less than your willingness to adjust it. Think of it like pacing a marathon. You pick a pace you can hold for the whole race, then you speed up or ease off depending on the hills in front of you. Retirement spending works the same way.
Morningstar found that retirees who flex their spending, skipping the inflation raise after a down year or using simple “guardrails,” can safely start higher, as much as 5.7%.[1] The trade-off is that your income moves around a bit from year to year.
The most common mistake I see is the opposite: picking one number and never revisiting it. Someone decides on $80,000 the day they retire and holds that line no matter what the market does. In a rough early stretch, that rigidity quietly drains the account. A small, temporary adjustment, spending a little less for a year or two, can go a long way toward protecting the plan. Flexibility is one of the lowest-cost ways to steady it.
What does a real withdrawal plan look like?
Here’s how that flexibility can help, using round numbers. This is a hypothetical illustration for education only, not a prediction or a promise of any particular result. Picture two retirees. Each has $2 million, and each wants $80,000 a year, a 4% start.
Now suppose the market drops hard in their first two years. Retiree A keeps taking the full $80,000 no matter what. Retiree B trims spending by 5%, down to $76,000, during the rough stretch, then goes back to normal once markets recover. Would a small $4,000 cut really change the ending? More than you’d guess.
By not selling as much while prices are low, Retiree B leaves far more money invested to bounce back. Historically, markets have recovered given enough time, though nothing is guaranteed. Retiree A, drawing full price in a falling market, locks in those losses and thins the account right when it can least afford it. Same portfolio, same average return over time, very different endings. The difference wasn’t the starting number. It was the willingness to adjust. In a strong early market the opposite can happen, and the retiree who trimmed may have given up spending they didn’t need to. The point isn’t that cutting is always right, only that adjusting beats holding one fixed number through anything.
What can change how much I can safely spend in retirement?
A handful of levers move your personal number up or down. Knowing them is how you turn a rule of thumb into a real plan.
- Guaranteed income. Social Security, a pension, or an annuity covers part of your spending, so your portfolio has less to do. The bigger that base, the more freedom you have to flex the rest.
- Taxes. What matters is what you keep after taxes. A smart withdrawal order and well-timed Roth conversions can lower your lifetime tax bill and stretch every dollar further.
- Your investment mix. Morningstar found that moderate portfolios, roughly 30% to 50% in stocks, tended to support the strongest safe rates.[1] Too little growth and you can fall behind. Too much and a downturn stings more while you’re drawing income.
- Your time horizon. Retiring at 55 is a very different math problem than retiring at 70. A longer retirement means a lower safe starting rate.
- Sequence of returns. A rough market in your first few years does more damage than the same drop later, because you’re drawing from a shrinking base. That first five-year stretch deserves extra care.
Frequently Asked Questions
How much can I safely spend in retirement if I have $1 million?
At a 4% start, $1 million supports about $40,000 in your first year, adjusted for inflation after that. Morningstar’s 2026 rate of 3.9% would put it closer to $39,000.[1] Your own number depends on your other income, your taxes, and how long you need the money to last.
What is the 4% rule in plain terms?
Spend 4% of your savings the first year of retirement, then give yourself an inflation raise each year after. Testing across history showed that pace had a strong chance of lasting at least 30 years.[4] Treat it as a starting point, not a promise.
Will I run out of money if the market crashes early in retirement?
Not necessarily, but early losses are the biggest threat, because you’re drawing from a smaller base. Two simple protections help a lot: keep one to two years of spending in cash, and ease back on withdrawals during a downturn instead of selling at low prices.
Does Social Security change how much I can withdraw?
Yes. Social Security and any pension cover part of your spending, so your portfolio carries less of the load. That often lets you draw more flexibly from your investments without straining the plan as much.
How often should I revisit my withdrawal rate?
At least once a year, and after any big market move. A safe rate is a pace you adjust, not a number you set once and forget.
See your own number
A rule of thumb is a fine place to start, but your real number deserves real math. Two free tools can help you pressure-test it: our Retirement Withdrawal calculator and our Retirement Planning calculator. Plug in your savings, your other income, and your timeline, and see what a sustainable pace looks like for you.
If you’d like a second set of eyes on the whole picture, that’s what we do. Retirement income planning is the heart of our work at Alchemy. You can book a free QuickFit call and we’ll talk it through, no pressure and no jargon.
This article is general education, not personalized financial advice. Your safe number depends on details no rule of thumb can see, so it’s worth reviewing your full picture with a fiduciary advisor before you set your retirement paycheck.
Sources
- Morningstar, The State of Retirement Income (2026 report). https://www.morningstar.com/business/insights/research/the-state-of-retirement-income
- Morningstar, What’s a Safe Retirement Withdrawal Rate for 2026? https://www.morningstar.com/retirement/whats-safe-retirement-withdrawal-rate-2026
- Financial Advisor Magazine, Morningstar Safe Retirement Withdrawal Rate For 2026 Is 3.9% (February 19, 2026). https://www.fa-mag.com/news/morningstar-safe-retirement-withdrawal-rate-for-2026-is-3-9-85940.html
- William Bengen introduced the 4% rule in his 1994 Journal of Financial Planning paper and raised his estimate to about 4.7% in his 2025 book, A Richer Retirement: Supercharging the 4% Rule (Wiley). Plain-language summary: https://www.boldin.com/retirement/a-richer-retirement-4-7-rule/