This Retirement Rule of Thumb Has Changed, but Most Retirees Haven’t Adjusted Their Strategy Yet

Retirement planning is undoubtedly very challenging. There are tons of variables to consider, from what age you plan to claim Social Security to whether you want to invest in retirement accounts that provide tax-deferred growth or accounts that allow pretax contributions during your working years.

There is another critical issue to consider that can shape how long your money lasts. It’s your withdrawal rate, or the rate at which you take money out of your retirement accounts. It’s one of the most important choices you’ll make in your later years, but unfortunately, many Americans are following an outdated rule.

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This standard retirement rule-of-thumb may not work anymore

You must set a reasonable withdrawal rate as a retiree so you don’t withdraw too much money from your retirement plans too quickly. If you withdraw too much too fast, you’ll drain your account balance and won’t leave enough invested to continue to earn reasonable returns. Your accounts will run dry, leaving you without enough money to live on.

To avoid this, many retirees have long followed the 4% rule, which was created by a financial planner in 1994 to provide an easy way to determine how much they could withdraw from their accounts each year.

The 4% rule called for withdrawing 4% of your portfolio balance in the first year of retirement. Then each year you can adjust your withdrawals to account for inflation. This rule is meant to give you a solid chance that your nest egg will last 30 years.

The problem is, it may not work anymore.

Why the 4% rule isn’t foolproof

The 4% rule was made based on assumptions at the time that it was created, and, unfortunately, those assumptions no longer necessarily hold. That’s why experts have repeatedly adjusted the amount they believe you can safely take from your 401(k) and other retirement accounts.

For example, in 2026, Morningstar estimated that you could withdraw 3.9%, rather than 4%, if you wanted to preserve your nest egg and make it last for life. And in 2025, this number was even smaller, with Morningstar setting a target withdrawal rate of 3.7% for wealth preservation.

While this may not seem like a huge change, the fluctuations in the numbers and the fact that the safe withdrawal rate is now consistently coming in lower show that you can no longer count on the 4% rule being accurate for you. That’s true in large part due to lower projections for future returns and longer life expectancies. Unfortunately, this means that if you are following the 4% rule, you face a very real risk that your money will not last as long as you need it to.

Given this risk, rather than opting for a generic rule of thumb, it may be better to consider your assets, income goals, all income sources, and other financial factors to develop a personalized plan for a withdrawal rate that makes sense for you. A financial planner can help, or you can use tools like withdrawal calculators to guide you in your decision on how much to take from your accounts to give you the best chance of your money lasting.

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