Safe Withdrawal Rates & Longevity
Plain English
A "safe withdrawal rate" (often cited around 4%) is a historical estimate of how much you could withdraw from a portfolio each year, adjusted for inflation, without running out of money over a set period in the past. It is not a guarantee for the future.
What is it?
A safe withdrawal rate is typically expressed as a percentage of an initial portfolio value, withdrawn in the first year and then adjusted for inflation each year after, based on historical analysis of how such a strategy would have performed across various past periods.
Why does it matter?
The withdrawal rate you choose, combined with your actual investment returns and how long you need the money to last, together determine whether a portfolio is likely to be sufficient — see the Retirement Income, Sequence-of-Returns Risk, and Longevity Scenario calculators for how these interact.
How does it work?
Historical safe-withdrawal-rate research generally looks backward at how a given withdrawal rate would have performed across historical market returns and inflation. It does not predict future returns, and results are sensitive to the specific time periods and asset allocations studied.
Risks and limitations
Past performance does not guarantee future results — a rate that worked historically could fail under a different future sequence of returns, inflation path, or unusually long lifespan. Longevity itself is uncertain: averages are not individual predictions.
Questions to ask a professional
What withdrawal rate am I assuming, and what does my plan look like if returns or inflation are worse than average? How long am I planning for, and what happens if I live longer than that?