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How Much Can You Actually Spend in Retirement? (It’s Not 4%) 

You spent three decades learning how to save. Almost nobody teaches you how to spend.

If you're retired or close to it, you're facing the question that matters more than any other in retirement planning: how much can you take out of your portfolio each year without running out? For thirty years, the standard answer was 4%. In the past year, two of the most widely cited voices on what researchers call the safe withdrawal rate changed their answers — in opposite directions. That disagreement isn't a problem. It may be the most useful thing to happen to retirement spending research in years, because it exposes what the 4% rule never was: a plan.

The Short Answer for 2026

Current research puts a sustainable starting withdrawal rate between 3.9% and roughly 5.7%. Morningstar's 2026 analysis supports 3.9% for fixed, inflation-adjusted spending. Bill Bengen, creator of the 4% rule, now points to 4.7% to 5%. Retirees who can flex their spending may start higher. There is no single right number — the answer depends on your situation.

The rest of this article explains why careful researchers disagree — and how to turn their disagreement into your number.

Where the 4% Rule Came From

A safe withdrawal rate — the term comes from the research literature, not from anyone promising safety — is the percentage of your portfolio you withdraw in your first year of retirement, increasing the dollar amount with inflation each year afterward, with a high probability that the money lasts the rest of your life.

In 1994, a financial planner named Bill Bengen tested every 30-year retirement in modern U.S. market history using a simple portfolio of stocks and bonds.[1] His finding: even someone who retired at the worst possible moment — straight into the worst markets on record — could have withdrawn just over 4% a year without running out. The “4% rule” was born.

Two things about that finding are routinely forgotten. It was a floor, built on the single unluckiest retirement date in the data — most retirees in history could have spent considerably more. And it was one researcher's set of assumptions: a specific portfolio, a specific horizon, a specific definition of failure. Change the assumptions, and the number moves. Which is exactly what has happened since.

The Rule’s Creator Now Says 4.7%

Bengen kept testing his own rule. In his 2025 book, A Richer Retirement, he revised his conclusion: with a more broadly diversified portfolio than the original study used, the worst-case historical floor rises from about 4.1% to 4.7%.[2]

The difference sounds small. It isn't. On a $1 million portfolio, 4.7% instead of 4.0% is $47,000 of first-year income instead of $40,000 — produced by the same money. (That's an illustration from the research, not a projection of anyone's actual outcome.)

Two nuances matter. First, 4.7% is still a floor — the rate that survived the single worst retirement start in U.S. history. Bengen has suggested that under conditions that aren't historically terrible, something closer to 5% is a defensible starting point, and retirees willing to adjust spending may reasonably start higher still. Second, his method is unchanged: it asks what history's worst case would have supported. If your view is that the future could be harder than the past, his number will feel generous.

Morningstar Says 3.9%

Morningstar's retirement research team asks a different question. Instead of looking backward at history, its annual State of Retirement Income study builds forward-looking forecasts for stock and bond returns, then asks what starting withdrawal rate gives a retiree a 90% chance of success over 30 years of fixed, inflation-adjusted spending.

For 2026, that answer is 3.9% — up from 3.7% the year before, but nearly a full point below Bengen's revised floor.[3]

The more interesting finding sits deeper in the same study. Retirees who don't demand a fixed, inflation-adjusted paycheck — who follow a flexible approach that trims spending after bad market years and allows raises after good ones — can justify starting rates near 5.7%. Within a single piece of research, the answer ranges from 3.9% to 5.7% depending on nothing but the retiree's willingness to adapt. The trade-off is real, though: a flexible plan means accepting genuine spending cuts in bad stretches — something not every budget can absorb. Flexibility, it turns out, may matter more than which rule you start from.

Why the Experts Disagree by a Full Point

So the creator of the 4% rule says 4.7% to 5%, and one of the industry's most widely followed research teams says 3.9%. Who's right?

Both. They're answering different questions. Bengen asks what the worst case in history would have supported. Morningstar asks what forecasted future returns support at a chosen confidence level. They assume different portfolios, different definitions of failure, and different spending behavior. Every one of those choices moves the number — and none of those choices is yours.

In short: the experts don't disagree about the math. They disagree about the assumptions — and your retirement runs on your assumptions, not theirs.

That's the real lesson of the past year of research. When credible researchers land a full percentage point apart, a rule of thumb stops being an answer and becomes what it always was: an input. On a $2 million portfolio, that single point of disagreement is $20,000 a year of lifestyle. A number that consequential deserves better than a borrowed assumption.

What Actually Determines Your Number

Averages won't rescue you either. The Bureau of Labor Statistics puts average annual spending for households 65 and older at roughly $61,000[4] — but you are not average, and neither is your balance sheet. Five factors do most of the work of setting a personal withdrawal rate:  

  • Your actual horizon. The studies assume 30 years. Retire at 60 in good health and you may need 35; retire at 70 and you may need 20. The supportable rate moves accordingly.
  • Your other income. Social Security timing and any pension change how much your portfolio has to carry — and how much of your spending is truly fixed.
  • Your flexibility. A guardrails strategy sets a starting withdrawal rate, then trims spending after poor market years and allows raises after strong ones. Research consistently rewards it — this is one of the biggest levers you control.
  • Your tax picture. A withdrawal from a traditional IRA, a Roth, and a taxable account are three different events. Where your assets sit changes what a gross withdrawal actually nets you.
  • Your first five years. Poor markets early in retirement do outsized damage, because withdrawals turn temporary declines into permanent losses — what planners call sequence-of-returns risk. The same average return, arriving in a different order, produces a different outcome.

Consider a hypothetical: two 65-year-olds each retire with $1.5 million. One has a pension covering her fixed expenses and can cancel a trip in a bad year without pain. The other has no pension and a mortgage. The first can defensibly start near the top of the research range; the second probably belongs near the bottom. Same portfolio. Different answers.

How We Guide This Decision: Cambridge’s A.I.M. System

Cambridge Advisors is a fee-only, fiduciary investment adviser in Omaha, Nebraska, registered with the SEC. We don't hand clients a rule of thumb, and we don't slot them into model portfolios. We work through the withdrawal-rate decision with a process we call the A.I.M. System — Assess, Implement, Monitor — and it maps directly onto everything above.

Assess is where your assumptions get built: your spending goal, your income sources, your health and horizon, your tax picture, and — honestly discussed — how much spending flexibility you can live with. This is the personal version of the assumptions the researchers argue about.

Implement turns those assumptions into a portfolio built around your income need, including which accounts you draw from first and why. No model portfolios — your withdrawal plan shapes your allocation, not the other way around.

Monitor is where the number stays honest. A withdrawal rate isn't a decision you make once. Markets move, health changes, plans change — so the rate gets revisited, guardrails-style, rather than set and forgotten. Financial planning is included in our investment management fee, so those revisits are part of the relationship, not a separate bill.

We can't remove the uncertainty from a 30-year plan — no one can. What we can do is replace a borrowed assumption with a number built from your facts, and adjust it as your facts change.

 

Key Takeaways

  • There is no single safe withdrawal rate. Current research spans 3.9% (Morningstar, fixed spending) to 4.7–5% (Bengen) — and up to ~5.7% with flexible spending.
  • Flexibility is one of the biggest levers you control: adjusting spending after bad years supports meaningfully higher starting rates.
  • Rules of thumb are research inputs, not plans. Your horizon, other income, taxes, and early-retirement market risk set your number.
  • A withdrawal rate is a decision you maintain, not one you make once.

 

Frequently Asked Questions

Is the 4% rule still valid in 2026?

As a benchmark, yes; as a plan, no. Its creator now puts the historical worst-case floor at 4.7%, while Morningstar's forward-looking research supports 3.9% for fixed spending. Use it to orient yourself, then build a number from your own situation.

What is a safe withdrawal rate?

It's a research term for the percentage of a portfolio a retiree withdraws in the first year of retirement — adjusting the dollar amount for inflation each year after — with a high probability of the money lasting a full retirement. It describes modeled probabilities, not a promise.

What is a guardrails strategy in retirement?

A guardrails strategy starts with a withdrawal rate, then adjusts along the way: spending is trimmed after poor market years and can rise after strong ones. In Morningstar's 2026 research, that flexibility supports starting rates near 5.7%, versus 3.9% for fixed spending.

How do I figure out my own withdrawal rate?

Start from your horizon, your other income sources, your flexibility, your tax picture, and your exposure to early-retirement market declines. If you'd rather not work through that alone, a fee-only fiduciary advisor can build the number with you — and keep it current.

 

Talk It Through

If any of this raises questions about your own number, we're glad to talk it through. Discovery meetings at Cambridge Advisors are complimentary, with no obligation.

 

Endnotes

1. William P. Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning (1994).

2. William P. Bengen, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More (Wiley, 2025). Corroborating coverage: Advisor Perspectives (Aug. 29, 2025); CNBC (Sept. 3, 2025). Accessed 07/15/26.

3. Morningstar, The State of Retirement Income (2026 ed.); “What’s a Safe Retirement Withdrawal Rate for 2026?” morningstar.com/retirement/whats-safe-retirement-withdrawal-rate-2026. Accessed 07/15/26.

4. U.S. Bureau of Labor Statistics, Consumer Expenditures—2024 (news release): average annual expenditures of consumer units with reference person age 65 and older, $61,432. bls.gov/news.release/cesan.nr0.htm. Accessed 07/16/26.

 

This article is for educational purposes only and is not investment, tax, or legal advice. It does not consider your individual circumstances. Consult a qualified professional before acting on any information here. Cambridge Advisors Inc. is a fee-only registered investment adviser. Registration does not imply a certain level of skill or training. Advisory services are offered only under a written agreement. Past performance does not guarantee future results. All investing involves risk, including possible loss of principal. Examples are hypothetical and for illustration only. Data cited from third-party sources is believed reliable but is not guaranteed. Figures are estimates as of the access date shown and may change.