Retirement Withdrawal Rate: What’s a Safe Number?

When my team and I go to companies and talk to employees about retirement savings, one of the topics we often hear discussed concerns withdrawing money from retirement savings.

I came upon this advice from our financial partner BALANCE that puts retirement spending into simple terms. It is a good starting point for discussions with your employees about using retirement savings, and it helps in understanding why saving is so important: 

For quite a while, the standard advice was that your best bet was to take 4% out of your total retirement nest egg every year to have enough money to last while enjoying a comfortable lifestyle in your golden years. There was some definite logic behind that number; a mixture of 60% of your money in stocks and 40% in bonds has historically been a very safe bet to return greater than 4% over any 30-year period. As long as you adjust your withdrawal for inflation periodically, you should be fine.

The problem though is that using a 3-decade time span evens out the rough spots in the market. In other words, what if the first few years of your retirement just so happen to be during a major downswing in the market in which you have the majority of your assets allocated? Suddenly the 4% plus an inflation adjustment isn’t feasible. So what do you do?

Adjust as you go
Start out withdrawing at 4% per year. After the first year, see if your investments have done well enough to afford you to increase the amount you withdraw to cover inflation. If your investments have lost value, look for ways to cut back on what you withdraw or create other sources of income. Use a retirement withdrawal calculator to determine a safe withdrawal amount.

Start lower
You may find that you want to ease your way into retirement, both from a work perspective and a withdrawal standpoint. If you can take 2-3% out for a few years while generating some income with a part-time job, you can get yourself on more solid footing for the rest of your retirement.

Consider annuities
Annuities can be a safer bet for retirees than bonds since they offer a guaranteed source of income. When balanced with investments in stocks, annuities can reduce your risk since the set return can offset fluctuations in other investments. However, make sure to discuss annuities with a certified financial planner as there are some aspects that could lessen the attractiveness of annuities for your situation.

The bottom line is that retirement withdrawals aren’t really a “fix it and forget it” proposition. While it is fine to start off with a 4% withdrawal rate and adjust for inflation as you go, be aware that you may need to alter that plan depending on how your investments perform. 

We provide unbiased advice with no hidden agenda, so the focus remains exclusively on you and your individual investment needs. We invite you to schedule a consultation today with Hanscom Investment Services.†  

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†Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Hanscom Federal Credit Union is not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Hanscom Investment Services, and may also be employees of Hanscom Federal Credit Union. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Hanscom Federal Credit Union. Securities and insurance offered through LPL or its affiliates are:

Not Insured by NCUA or Any Other Government Agency / Not Hanscom Federal Credit Union Guaranteed / Not Hanscom Federal Credit Union Deposits or Obligations / May Lose Value

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About Author

Maria Porto
Maria Porto

Maria Porto is Hanscom FCU's assistant vice president of partner relations. She may be reached at

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