Withdrawal rate is a key lever in retirement planning. Small differences can mean big changes in the target portfolio.
Compare rates in RetirementIt converts a yearly income target into a portfolio target. Lower rates are more conservative (bigger target). Higher rates are less conservative (smaller target).
For $60,000/year:
Run your plan at 3%, 4%, and 5%. If your plan only works at 5%, you may want to adjust spending, contributions, or retirement age.
Your withdrawal rate isn't the only lever — what you're withdrawing from matters too. A portfolio that's still heavily weighted to shares can be hit hard by a downturn early in retirement, forcing you to sell at a loss to fund withdrawals. This is a big reason retirees hold more bonds than younger investors. See ETF vs Bonds for how shifting the mix affects both growth and stability.
It’s more conservative, but it requires a larger portfolio. The “best” rate depends on your flexibility and time horizon.
It’s a widely discussed rule of thumb based on historical data and assumptions, but it’s not guaranteed.
Some people do, especially with flexible spending. It generally increases the risk of running out during bad markets.
It’s simplified. Use it for scenario testing rather than exact forecasts.
Spending. Lower spending reduces the required portfolio dramatically.