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 Giles: So sticking with the base case, the number that you just mentioned, 3.9%, that\u2019s 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\u2019re suggesting that they adjust their spending each year to align with those safe withdrawal rates. Is that the right way to interpret it?<\/p>\n Benz: It isn\u2019t. And I wanted to address this, Margaret, because this comes up a lot. And I don\u2019t blame people for being confused. Who would want to have to adjust their withdrawals up and down in this fashion? You probably wouldn\u2019t. You\u2019d 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\u2019t 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\u2019re 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.<\/p>\n How Retirees Can Spend More<\/p>\n Giles: Right. So let\u2019s 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\u2019re 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?<\/p>\n Benz: Right. This is a section of the paper that Amy Arnott<\/a> has been working on for the past few years. It\u2019s been a fixture in this research because we don\u2019t 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\u2019ll just inflation-adjust that dollar amount thereafter, not pay any attention to what\u2019s going on in your portfolio. In reality, most people don\u2019t 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\u2019s good. So the question is, what kind of flexible spending system should you use? And that\u2019s 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\u2019re willing to adjust up and down based on what is going on with your portfolio.<\/p>\n So, one strategy that I come back to again and again is what\u2019s called the guardrails strategy, where you are taking less or more, depending on what\u2019s 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\u2019t mind a little bit of variability in their spending from year to year. And then a strategy I would point people toward, if they\u2019re 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\u2019s 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.<\/p>\n Here\u2019s How You Can Spend More During Retirement <\/p>\n Three strategies to consider if you want to maximize your lifetime spending.<\/p>\n 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?<\/p>\n 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\u2019t keep up with inflation as they progress throughout their retirement. So as they move into their mid-70s, early 80s, they\u2019re not taking the full inflation adjustment. They\u2019re 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\u2019s something to investigate, again, if you\u2019re OK with that trade-off of spending less as your retirement progresses.<\/p>\n Cutting Investing Expenses to Increase Take-Home Spending<\/p>\n 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?<\/p>\n Benz: Right. So cutting your investment expenses is what I\u2019m talking about here. And so you\u2019d want to look at the totality of what you\u2019re paying in terms of fund expenses. If you\u2019re paying for investment advice, that can be money well spent, but you want to be parsimonious and make sure that you\u2019re getting good value for money. In all of our research, one thing we don\u2019t talk about is the role of expenses in terms of your withdrawal rate. So we are not assuming that anyone\u2019s paying any investment costs. Of course, we\u2019re all paying investment costs. So it\u2019s 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\u2019s why I think they can make great core constituents for retiree portfolios.<\/p>\n How Smart Tax Planning Can Boost Take-Home Returns<\/p>\n 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?<\/p>\n 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\u2019d have more perhaps taxable accounts where you will be eligible for that long-term capital gains rate on your withdrawals. And then, once you\u2019re 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\u2019s 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.<\/p>\n A Tax-Smart Plan for In-Retirement Withdrawals in 3 Steps <\/p>\n Consider these strategies to stretch out your tax savings during your retirement years.<\/p>\n Giles: All right. Takeaway for me: The 3.9% is not the be-all, end-all. Christine, thanks for taking the time.<\/p>\n Benz: Thanks so much, Margaret.<\/p>\n Giles: I\u2019m Margaret Giles with Morningstar. Thanks for watching.<\/p>\n Watch How to Make the Most of Your IRA in 2026<\/a> for more from Christine Benz<\/a> and Margaret Giles<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Key TakeawaysWe look at a variety of different asset allocations to see which supports the highest safe withdrawal…\n","protected":false},"author":2,"featured_media":465666,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,147,530],"class_list":["post-465665","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\/465665","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=465665"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/465665\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/465666"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=465665"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=465665"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=465665"}],"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>Should Retirees Adjust Their Spending to 3.9%?<\/p>\n![\"Collage](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/02\/1770962236_26_IAW7JTGK6JC6FNL2V6DCRLQZP4.png\")
<\/a>Why Retirees Can Spend More in Early Retirement<\/p>\n![\"Collage](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/02\/JFQW2ZMVBNBMDAUPPBW537LUGE.png\")
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