Benz: Yeah, it\u2019s kind of a dispiriting number, Margaret. 3.9% was the figure in 2025. And to arrive at it, we use our internal team\u2019s forward-looking capital markets assumptions. It was a touch higher than it was in 2024, but 3.9%, if you have a $1 million portfolio, that\u2019s $39,000, probably doesn\u2019t feel great for a lot of retirees. And so if I have a sound bite on this report, it\u2019s that you shouldn\u2019t just anchor on that 3.9% or 4% because it assumes a very conservative system of spending that, frankly, most people probably wouldn\u2019t use anyway. So it assumes that you\u2019re just going to take that initial withdrawal and then inflation-adjust it thereafter. And basically put blinders on to how your portfolio has behaved. Most people don\u2019t spend that way. They actually do pay attention to how their portfolios have behaved. And the good news is is if you are willing to employ an element of flexibility to your spending, you can start with a higher starting withdrawal. So, Amy Arnott worked on this part of the paper, and she found in several of the strategies that she explored in the paper that you can get closer to, like, 6% if you\u2019re willing to use a strategy that\u2019s more flexible. So I would urge people to explore some of those strategies, explore the trade-offs associated with them.<\/p>\n
And then I would also underscore the importance of time horizon in all of this. So for people who have a 30-year time horizon\u2014that\u2019s kind of the base case that we use in this research\u2014it assumes that you\u2019re just starting out in retirement and you\u2019re maybe in your mid-60s or something like that. Well, if you\u2019re an older retiree, if you\u2019re maybe 75 or 80, the good news is that you can take more from your portfolio because your portfolio time horizon has shrunk a little bit. So I would urge people to look at some of the graphs that depict how time horizon relates to the safe spending rate. And what you can see, if you look at that, is even using that base case, very conservative spending system, you can get close to, like, 7% reasonably on a balanced portfolio if you have like, a 15-year time horizon as opposed to one that\u2019s 30 years.<\/p>\n
What\u2019s a Safe Retirement Withdrawal Rate for 2026? <\/p>\n Retirees can increase their spending power by taking a more flexible approach.<\/p>\n Plus, the trade-offs new retirees should be prepared to make.<\/p>\n Giles: You and the team also found that Treasury Inflation-Protected Securities, or TIPS, can be an attractive component of a retirement spending plan. Can you talk about that?<\/p>\n Benz: Yeah, TIPS have a lot of valuable attributes, or at least a couple of biggies. One is that your payments are adjusted for inflation. Actually, your principal value adjusts, and in turn, your income distribution adjusts as well. But you get that inflation adjustment, which makes them a beautiful thing from the standpoint of delivering real inflation-adjusted retirement income. And then you also get securities that are protected by the full faith and credit of the US government. So those are two really attractive attributes. And yields are not bad today. So Jason Kephart did this portion of the paper. I think he looked at Sept. 30, assembling a laddered portfolio of TIPS. He found you could get like 4.5%. And so that\u2019s not a bad distribution from a portfolio. The downside from that laddered TIPS portfolio is that when it is exhausted, your portfolio there is exhausted as well. So we would urge people to have additional securities beyond that TIPS portfolio. But it\u2019s a really nice solution for people who are looking for very tightly controlled inflation-adjusted income.<\/p>\n Will Retirees Who Delay Social Security Still Benefit From the Inflation Adjustment?<\/p>\n Giles: Speaking of inflation protection, Social Security payouts are getting an inflation adjustment this year. How much will it be?<\/p>\n Benz: It\u2019ll be 2.8% for people who are receiving Social Security. And another point I would make on this front, Margaret, is that if you\u2019re someone who is delaying Social Security, or you\u2019re not yet taking Social Security, the good news is that your eventual payout that you\u2019ll receive will also receive these inflation adjustments that happen along the way. So if you\u2019re someone who is looking to delay Social Security because you want to enlarge your eventual benefit, but you see these really nice inflation adjustments coming through, never fear, you are partaking of them, even if you\u2019re not currently getting payments from Social Security.<\/p>\n Which Investors Benefit From the New Senior Deduction?<\/p>\n Giles: That\u2019s helpful to know. So to wrap up here, as we head into tax season, there\u2019s also a new senior deduction that went into effect in 2025. Can you discuss who might be able to take advantage of that?<\/p>\n Benz: Right. So this is a $6,000 deduction that is available to seniors, whether they itemize their deductions or take the standard deduction. The crucial thing to remember here, though, is that there are some pretty strict income thresholds in place. So it\u2019s $75,000 for single filers and double that amount for married couples filing jointly. So not everyone will be able to take advantage of that new deduction, but it\u2019s definitely something to check out. And it\u2019s something that will affect the return that you will file in 2026. So for the 2025 tax year.<\/p>\n Giles: All right. Certainly helpful to keep in mind for retirees. Christine, thanks for being here.<\/p>\n Benz: Margaret, thank you so much.<\/p>\n Giles: I\u2019m Margaret Giles, the Morningstar. Thanks for watching.<\/p>\n Watch 5 Mistakes to Avoid With Your Investment Portfolio in 2026<\/a> for more from Christine Benz<\/a> and Margaret Giles<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Key TakeawaysIn 2026, you can contribute $7,500 to an IRA if you\u2019re under age 50 and $8,600 if…\n","protected":false},"author":2,"featured_media":437347,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,147,530],"class_list":["post-437346","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/437346","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=437346"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/437346\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/437347"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=437346"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=437346"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=437346"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"Illustration](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/01\/VUKBNSNCKNCR7PMSIFWUVSOT5E.png\")
<\/a>How New Retirees Can Spend More Without Risking Their Savings <\/p>\n![\"Illustration](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/01\/ABDFXUL3ENDUZJXLHOIJFGBMKI.png\")
<\/a>How TIPS Can Benefit a Retirement Spending Plan<\/p>\n