Imagine retiring with peace of mind, knowing your savings will last you through decades of golden years—but how much can you safely pull out each year without risking financial ruin? That's the big question on every retiree's mind, and it's one that keeps shifting based on things like stock market values, interest rates on bonds, inflation forecasts, your personal lifespan, and how you've divided your investments between stocks and bonds. In 2026, determining that 'perfect' safe starting withdrawal rate feels like chasing a moving target, but Morningstar's latest research offers some solid guidance to help you navigate it.
But here's where it gets intriguing: According to Morningstar's 2025 retirement income study (which you can dive into at https://www.morningstar.com/business/insights/research/the-state-of-retirement-income), the highest safe starting withdrawal rate for folks aiming for steady, inflation-adjusted spending year after year—while keeping a 90% chance of not depleting their funds over a typical 30-year retirement—is now set at 3.9%. To break that down for beginners, a withdrawal rate is basically the percentage of your portfolio you take out annually; for a $1 million nest egg, 3.9% means about $39,000 in the first year, adjusted for inflation each time after. This figure comes from forward-looking predictions on how different investments will perform and how inflation might play out, excluding any income from Social Security or other sources outside your investments.
Our 'base case' estimate has ticked up a bit from the 3.7% we suggested in last year's report (check it out at https://www.morningstar.com/retirement/whats-safe-retirement-spending-rate-2025). For context, here's a quick look back: It was 3.3% in 2021 (see https://www.morningstar.com/retirement/whats-safe-retirement-spending-rate-decades-ahead), 3.8% in 2022 (https://www.morningstar.com/retirement/whats-safe-withdrawal-rate-today), and 4.0% in 2023 (https://www.morningstar.com/retirement/good-news-safe-withdrawal-rates). Importantly, these aren't signals for retirees already enjoying the good life to crank up or dial down their spending whimsically—they're tailored for someone just stepping into retirement today, as our best guess for a safe launch.
And this is the part most people miss: New retirees don't have to stick with such a conservative number—and in many cases, they probably shouldn't. Our findings show that if you're open to some ups and downs in your annual spending, you could start at nearly 6%, which is a game-changer for those wanting more financial freedom. The ideal amount of wiggle room in your spending plan hinges on your personal comfort with changes, especially if things like housing or bills are already covered by income streams not tied to your portfolio.
To paint a clearer picture, our research explored various real-life scenarios blending portfolio withdrawals with extras like Social Security (learn more at https://www.morningstar.com/retirement/4-reasons-take-social-security-now) and annuities (a guide to types is at https://www.morningstar.com/retirement/annuities-unveiled-guide-different-types-annuities). We discovered that boosting income from these sources—say, by postponing Social Security (tips at https://www.morningstar.com/retirement/take-these-steps-make-your-money-last-retirement)—pairs beautifully with adaptable withdrawal tactics. On the flip side, ramping up your overall lifetime income often means less money left for heirs or donations, a trade-off worth pondering.
Is 3.9% the New 4.0%?
Just like in previous years, we rely on forward-looking projections for asset returns and inflation to pinpoint a safe starting rate for fresh retirees, ignoring Social Security or similar perks. Why forward-looking? Because at retirement's start, it's impossible to predict exactly what will happen over 30 years. Incorporating today's market conditions helps decide if your initial rate should be higher or lower, and even shapes the best mix of investments based on your spending goals.
To make this advice practical, we collaborated with Morningstar's Multi-Asset Research team for predictions on yields, valuations, and inflation. Like other investment experts, they create estimates for returns, volatility, and inflation. From there, we project 30-year outcomes. This year's capital market assumptions—expressed as average figures—have shifted slightly but mostly positively due to a new approach. Previously, we used broad top-down factors like expected earnings growth or market valuations; now, we mix those with detailed bottom-up analyses from Morningstar's equity analysts on specific companies. While inflation expectations edged up from 2.29% in 2024 to 2.46% in 2025, returns look a tad better across almost all asset types thanks to this tweak.
Here's a snapshot from our table: A new retiree eyeing a 30-year stretch can safely withdraw 3.9% from a portfolio with 30% to 50% in stocks. Fun fact—adding more stocks doesn't boost the safe rate due to their higher swings; it actually lowers it a bit. The table also ties in time horizons and asset mixes, showing that if you're older and have a shorter outlook, you might comfortably spend more than our 30-year base case.
We also dug into unexpected twists like market downturns, inflation spikes, or early retirement surprises. Retirees hit with poor returns in their first five years who didn't cut back were far more likely to burn through their savings than those who caught a break. Likewise, high early inflation could drain funds quickly unless adjustments are made, like dipping into savings or reducing expenses.
How Flexible Strategies Can Help (But Aren’t for Everyone)
Facing a 3.9% rate—or just $39,000 from a $1 million portfolio—might feel like a tough sell for new retirees craving more. That's why we tested flexible strategies to potentially raise that starting safe withdrawal. These work by curbing overspending during market slumps while rewarding you with bumps in good times.
We compared popular flexible methods against a fixed real withdrawal system (where you take the same inflation-adjusted amount yearly). Each flexible option allows a higher initial safe rate than the base case. The constant percentage and endowment approaches topped the list for most asset mixes. The constant percentage method applies a fixed percentage to your portfolio's value each year, adjusting withdrawals up or down. The endowment method uses a percentage of the average portfolio value over 10 years, smoothing things out. Both enable bigger starts by making notable annual tweaks, often cutting spending when values drop.
Our exhibit illustrates how each strategy juggles a higher starting rate with varying cash flow ups and downs. Plus, the bottom metric—the spending-to-ending ratio—shows how well each balances total spending with leaving something for the future.
The Role of Guaranteed Income
Your willingness to handle big swings in portfolio withdrawals depends on your budget makeup—how much is fixed (like rent) versus flexible (like vacations)—and income from elsewhere, particularly Social Security.
To spotlight guaranteed income, we shifted focus from just 'withdrawal rates' to total first-year spending, merging portfolio pulls with Social Security. For instance, in our base case, a $39,000 portfolio withdrawal (3.9%) plus $36,000 from Social Security equals $75,000 for year one.
The data highlights that waiting on Social Security is smart for maximizing lifetime income: The sweet spot is delaying it and using work income or other non-portfolio funds until it kicks in. Adaptive strategies, like the guardrails method we've covered before, shine even brighter with a strong, reliable income base.
But here's where it gets controversial: Many folks swear by the old 4% rule as a golden standard for retirement withdrawals, but our findings suggest 3.9% is now the safer bet amidst today's market realities. Is this a sign the traditional rule is outdated, or just a temporary dip? What do you think—should retirees adapt to these lower rates, or is there a counterargument that the markets will rebound enough to make higher withdrawals feasible again? Share your views in the comments; we'd love to hear differing opinions!
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies (https://www.morningstar.com/editorial-policy).
