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Morningstar's Guide to Setting Your Withdrawal Rate

Here's how to tap into your nest egg when the time comes.

Susan Dziubinski

Note: This article is part of Morningstar.com's 2020 special report, "Are You Able to Retire?" A version of this article originally published in June 2020. 

Investors spend decades building their retirement kitty. During that time, they've probably learned a thing or two about how to allocate their assets, keep their investment costs low, and maximize their aftertax results. Chances are they've accumulated several different accounts (both taxable and tax-deferred) for funding their retirements, too. And if they've saved well and invested appropriately, they will likely find themselves in a position to retire--or at least scale back their work load at some point.

But with retirement comes a whole new set of questions about how to generate income from those savings (among other sources). How much of your nest egg should you tap each year in retirement? Should you claim Social Security now or wait? Which accounts should you tap first?

And the biggest question of all: How can you ensure that your assets will last the duration of your retirement?

"One of the key ways to make your portfolio last throughout retirement is to give care to how much you withdraw from your portfolio," says Morningstar's director of personal finance Christine Benz. "It's a tough question, and the right answer will only be apparent in hindsight."

This guide is designed to help those entering or in the decumulation phase determine their withdrawal rates.

3 Approaches to Setting a Withdrawal Rate
Consider these strategies to help you decide how much to withdraw from your portfolio.

How to Develop a Sustainable Withdrawal Plan
Calculating a safe withdrawal rate and crafting a cash flow and account sequencing system are key elements to nail down before retirement.

Should Retirees Adopt a Flexible Withdrawal Strategy?
In today's market, retirees would be wise to be flexible with their spending plans.

How Do Flexible Retirement Withdrawals Work in Practice?
Financial planner and retirement researcher Jonathan Guyton explains how to implement spending rules that fluctuate with the market--but not too much.

Wade Pfau: The 4% Rule Is No Longer Safe
The noted retirement researcher discusses how pre-retirees and retirees can adjust their plans in times of market stress.

How to Create a Retirement Policy Statement
Use our template to document your retirement assets, strategy, and spending system.

Should Your Withdrawals Mirror Your RMDs?
While RMDs are usually pretty conservative, that doesn't make an RMD-based withdrawal system ideal.

7 Retirement-Portfolio Withdrawal Mistakes to Avoid
Asset allocation, time horizons, and taxes can complicate withdrawal-rate planning.

Get a Tax-Smart Plan for In-Retirement Withdrawals
Consider these strategies to stretch out your tax savings during your retirement years.

Is There An Upside to Sequence of Return Risk?
Michael Kitces says retirees could be more flexible with withdrawal rates.

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