4 Simple Ways to Boost Your Safe Withdrawal Rate

Key TakeawaysWe look at a variety of different asset allocations to see which supports the highest safe withdrawal rate. When we ran the research in 2025, it was a fairly light equity allocation, just between 20% and 50% of equities in that portfolio, for that 3.9% safe withdrawal rate.Retirees shouldn’t adjust their spending each year to align with safe withdrawal rates; this is meant to be guidance for people who are just embarking on retirement.If retirees are willing to be flexible with their withdrawals, that can help elevate how much they can spend.Retirees tend to spend the most early in their retirement, and then their spending trails down a little bit, or doesn’t keep up with inflation, as they progress throughout their retirement.Cutting investing expenses is a great way to elevate take-home spending.When it comes to tax planning, the goal is to try to reduce the drag of taxes on those withdrawals because they will cut into take-home withdrawals.

Margaret Giles: Hi, I’m Margaret Giles from Morningstar. Morningstar’s annual safe withdrawal rate research suggests that new retirees consider a 3.9% starting withdrawal if they’re looking for the same amount of spending throughout a 30-year retirement. Joining me to discuss how retirees can increase their withdrawals is Christine Benz. She’s one of the co-authors of the research and Morningstar’s director of personal finance and retirement planning. Christine, thanks for being here.

Christine Benz: It’s great to see you, Margaret.

The Base Case for the Safe Withdrawal Rate

Giles: Before we delve into ways to elevate that retirement spending, can you discuss that 3.9% number and what assumptions it makes?

Benz: Right. We have what’s called our base case for this research, and the base case assumes a 30-year spending horizon. So if someone retires at age 65, we assume that their life expectancy is 95, and they’ll spend over that 30-year period. We also target a 90% probability of success. That’s in our base case. And so what that means is that in 90% of the trials that we run, and we run these Monte Carlo simulations, in 90% of them, there’s at least a dollar left over, often a lot more than a dollar left over at the end of that 30-year period. We look at a variety of different asset allocations to see which supports the highest safe withdrawal rate. When we ran the research in 2025, it was a fairly light equity allocation, just between 20% and 50% of equities in that portfolio, for that 3.9% safe withdrawal rate. Higher amounts in equities and lower amounts in equities corresponded actually with lower withdrawal rates.

What’s a Safe Retirement Withdrawal Rate for 2026?

Should Retirees Adjust Their Spending to 3.9%?

Giles: So sticking with the base case, the number that you just mentioned, 3.9%, that’s the most recent from 2025, 3.7% is what you found in 2024, and 4% in 2023. So similar, but a little change year to year. Some people might assume that you’re suggesting that they adjust their spending each year to align with those safe withdrawal rates. Is that the right way to interpret it?

Benz: It isn’t. And I wanted to address this, Margaret, because this comes up a lot. And I don’t blame people for being confused. Who would want to have to adjust their withdrawals up and down in this fashion? You probably wouldn’t. You’d be terrified every time it came time to revisit what your withdrawal rate should be. So this is meant to be guidance for people who are just embarking on retirement. And the idea is: Is the guidance to kind of be prepared to step off the gas because things aren’t looking that great? Or is it go go go, because either valuations are cheap or yields are great, or maybe some combination thereof? So, I often think that this kind of 2021 research, when we first did this research, is a really good example of what we’re trying to do here. So the number when we did the late 2021 research was 3.3%, and it was geared toward people just about to embark on retirement. 3.3%, of course, is a light withdrawal rate, but the thing we are looking at is that yields were really low, inflation was starting to pick up, equity valuations were high. And guess what? 2022 was a bad market for both stocks, bonds, and inflation, all of the things you want to be careful about. So I think that the point is that people should be using this as guidance if they are about to retire.

How Retirees Can Spend More

Giles: Right. So let’s talk about how people can elevate their spending, because that 3.9% might feel a little bit low. One key message from the paper is that if you’re willing to be flexible with your withdrawals, that can help elevate how much you can spend. So how does that work, and are there specific strategies that people should be looking into?

Benz: Right. This is a section of the paper that Amy Arnott has been working on for the past few years. It’s been a fixture in this research because we don’t think that people should settle for that base case spending system. Because it does, the base case means that you will take that initial percentage, say, 3.9%, and then you’ll just inflation-adjust that dollar amount thereafter, not pay any attention to what’s going on in your portfolio. In reality, most people don’t do that. They do pull in their spending a little bit if the market is bad, and they do give themselves a little bit more permission to spend if it’s good. So the question is, what kind of flexible spending system should you use? And that’s what Amy Arnott examines in this section of the paper. Where she looks at a variety of different spending strategies. And what she finds is that spending, initial spending, as well as lifetime spending, can be higher if you’re willing to adjust up and down based on what is going on with your portfolio.

So, one strategy that I come back to again and again is what’s called the guardrails strategy, where you are taking less or more, depending on what’s gone on in your portfolio. But there are also some guardrails around how low your withdrawals can go in a bad market environment and how high they can go in a good one. So that is an appropriate strategy for people who don’t mind a little bit of variability in their spending from year to year. And then a strategy I would point people toward, if they’re looking for kind of a simpler rule of thumb, would be simply taking a fixed withdrawal, like we do in our base case, but also pulling back and not taking an inflation adjustment in the year after the portfolio has lost value. So that’s just kind of a simple spending trick that does a good job of enlarging initial withdrawals and can give people a little bit higher quality of life early in retirement.

Here’s How You Can Spend More During Retirement

Why Retirees Can Spend More in Early Retirement

Giles: Right. Certainly helpful to consider. So you and your co-researchers also found that retirees can spend more early on in retirement if they assume that their spending will follow the kind of general pattern of older adults. Can you discuss that?

Benz: Yeah, this is part of that flexible spending system discussion. But the idea is that when various entities have looked at how retirees actually spend, and this is true for less affluent retirees as well as more affluent ones, one pattern we see is that people do tend to spend the most in the early years of retirement, and then their spending trails down a little bit or doesn’t keep up with inflation as they progress throughout their retirement. So as they move into their mid-70s, early 80s, they’re not taking the full inflation adjustment. They’re actually spending a bit less as the years go by. So Amy looked at this in that section of the paper, incorporating some research from the Employee Benefit Research Institute. What she found is that people who are comfortable with that trade-off of perhaps not accelerating spending in line with the inflation rate, taking more, like 2% inflation adjustments versus 3%, they can spend a 5% starting withdrawal rate. So that’s something to investigate, again, if you’re OK with that trade-off of spending less as your retirement progresses.

Cutting Investing Expenses to Increase Take-Home Spending

Giles: Right. So, you also believe that cutting expenses is a great way to elevate your take-home spending. What can retirees do in that area?

Benz: Right. So cutting your investment expenses is what I’m talking about here. And so you’d want to look at the totality of what you’re paying in terms of fund expenses. If you’re paying for investment advice, that can be money well spent, but you want to be parsimonious and make sure that you’re getting good value for money. In all of our research, one thing we don’t talk about is the role of expenses in terms of your withdrawal rate. So we are not assuming that anyone’s paying any investment costs. Of course, we’re all paying investment costs. So it’s important to try to get yours as low as you possibly can get them to go. Total market index funds are your friend in this context. They tend to have very low expenses, close to 0%, not quite at 0%, but as pretty much as close as you can get to 0%. That’s why I think they can make great core constituents for retiree portfolios.

How Smart Tax Planning Can Boost Take-Home Returns

Giles: Right. And to wrap up here in kind of that same general vein, you also think that smart tax planning can really help boost take-home returns. Are there any best practices there?

Benz: Absolutely. So that base case that I talked about does not factor in the role of tax costs. Obviously, they will bite into your take-home returns from that portfolio. So you really want to be thoughtful during the accumulation years before you are in retirement. Think about the complexion taxwise of your various accounts. Ideally, you would have more assets in Roth accounts. You’d have more perhaps taxable accounts where you will be eligible for that long-term capital gains rate on your withdrawals. And then, once you’re in retirement, you want to think about what is the best sequence for me to take withdrawals? Where am I going for my withdrawals on a year-to-year basis, with an eye toward limiting the drag of taxes? And here’s where it can really pay to get the advice of a tax professional or an investment professional to give you some guidance around where to go for money on a year-to-year basis. You should also get some guidance on whether converting some of those traditional IRA, 401(k) assets to Roth might be an advantageous strategy for you. So the name of the game is to try to reduce the drag of taxes on those withdrawals because they will cut into your take-home withdrawals.

A Tax-Smart Plan for In-Retirement Withdrawals in 3 Steps

Giles: All right. Takeaway for me: The 3.9% is not the be-all, end-all. Christine, thanks for taking the time.

Benz: Thanks so much, Margaret.

Giles: I’m Margaret Giles with Morningstar. Thanks for watching.

Watch How to Make the Most of Your IRA in 2026 for more from Christine Benz and Margaret Giles.