What Is the Safe Retirement Withdrawal Rate for 2026?

Retirement Planning

The safe retirement withdrawal rate for 2026 is 3.9% according to Morningstar's most recent State of Retirement Income research, up from 3.7% in 2025. That assumes a 30-year retirement, a portfolio with 30% to 50% in equities, and a 90% probability of not running out of money. Retirees willing to flex their spending up and down with markets can sustainably withdraw closer to 6%.

The 4% rule has shaped retirement planning conversations for thirty years. It was useful, but it is also outdated. Bond yields, equity valuations, and longevity have all moved since 1994, and the math has moved with them.

Why is the safe withdrawal rate not 4% anymore?

The 4% rule was developed by William Bengen in 1994 using historical market returns from 1926 forward. Morningstar's research instead uses forward-looking return forecasts for the major asset classes, which is the key methodological difference. When future returns look lower than historical averages, the safe withdrawal rate falls.

The 2026 number is 3.9%, slightly above last year. The increase reflects improved capital markets assumptions from the prior year, and applies to portfolios that hold between 30% and 50% in equities with the remainder in bonds and cash.

How much income does 3.9% actually produce?

A 3.9% withdrawal rate on a $1M portfolio produces $39K per year in pre-tax income, before Social Security or pensions. Scaling up: $2M produces $78K, $5M produces $195K, $10M produces $390K.

Portfolio size	Year-1 withdrawal at 3.9%	Year-1 withdrawal at 6% (flexible)
$1M	$39K	$60K
$2M	$78K	$120K
$5M	$195K	$300K
$10M	$390K	$600K

These numbers exclude Social Security, which for most households covers another $30K to $80K per year of essential spending.

Why does a more equity-heavy portfolio not support a higher withdrawal rate?

More stocks introduces more sequence-of-returns risk, which is the danger of hitting a bear market early in retirement. A 30% drop in year two of retirement is harder to recover from than the same drop in year fifteen, because you are pulling from a smaller base while the market is down.

More equity-heavy portfolios generally don't support the highest starting safe withdrawal rates because of their higher levels of volatility and associated sequence of return risk. A 30% to 50% equity allocation is the sweet spot for retirees taking fixed inflation-adjusted withdrawals.

What are dynamic withdrawal strategies?

Dynamic withdrawal strategies adjust your spending each year based on portfolio performance, which lets you start with a higher withdrawal rate in exchange for variable income. Retirees who are willing to adjust spending, cutting back slightly in weak markets and spending more in strong ones, can safely start with withdrawal rates closer to 6%.

The most common dynamic methods are the guardrails approach (raise spending after strong years, cut after weak ones), the RMD method (divide portfolio value by life expectancy each year), and the spending decline method (acknowledge that real spending naturally falls in your 70s and 80s).

How does Social Security change the math?

Delaying Social Security to age 70 is one of the highest-value decisions a retiree can make, because it provides an inflation-adjusted lifetime income floor that lets your portfolio support a higher effective withdrawal rate. The trade-off is that you spend more from the portfolio in your 60s.

What is the right rate for me?

The right rate depends on three things: how long your retirement is likely to last, how much guaranteed income you have outside the portfolio, and how flexible you are willing to be with annual spending. A 55-year-old retiree with no pension needs to be more conservative than a 70-year-old retiree with a pension covering essentials.

For most clients we work with at Baskets Capital, the answer is not a single number. It is a glide path that starts conservative, adjusts to market conditions, and treats Social Security as the floor rather than the gravy.

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