How to Find Your Safe Withdrawal Rate: A Step-by-Step Method

3.9%. According to Morningstar's latest research, that's the starting withdrawal rate that still leaves money in your account in 90% of simulated futures over a 30-year retirement. It's a useful place to start, but it isn't your number. Here's the short answer to how to find your safe withdrawal rate. Divide what you need from your portfolio each year by what's in it. Then test that rate against three things: how long the money has to last, how much risk of running out you're willing to accept, and how much you could really cut back in bad years. This article walks through each step.

Start with the formula

The math itself is simple:

Withdrawal rate = yearly withdrawal from your portfolio ÷ portfolio value

Take $40,000 a year from $1,000,000 and your rate is 4%. Take $30,000 and it's 3%.

That tells you the rate you plan to use. It doesn't tell you whether that rate is safe. "Safe" depends on assumptions: how many years you need to fund, what you're invested in, and what markets happen to do in your first few years of retirement. Those assumptions are why the published numbers don't agree.

Why the published numbers disagree

You'll see "safe" rates from the low 3s to above 6%. Mostly they aren't contradicting each other. They're answering different questions.

What to take from this: the number changes with the method. Fixed spending or flexible? History or forecasts? Thirty years or fifty? Pick the method that matches how you'll actually live, not the one with the biggest number.

Morningstar's own figure also changes from year to year as its return forecasts change. Past editions have ranged from 3.3% to 4.0%. That's another reason to treat any single figure as an anchor, not an answer.

How to find your safe withdrawal rate in six steps

Step 1: Subtract your other income first

Your portfolio doesn't have to pay for everything. Social Security, a pension or annuity income all shrink the gap your savings have to fill.

Say you spend $6,000 a month, which is $72,000 a year. If Social Security and a pension cover $36,000 of that, your portfolio only needs to supply the other $36,000. On a $900,000 portfolio, that's 4%. Without the other income, the same lifestyle would mean taking 8%.

So when you claim Social Security matters. A larger benefit later means smaller withdrawals for the rest of your life. A smaller benefit sooner means bigger ones. Also list the large one-time costs you can see coming, like a new roof, a car, or helping a child. Those come out of the portfolio too.

Step 2: Pick a time horizon that takes longevity seriously

Most research, including Morningstar's 3.9%, assumes a 30-year retirement. If you retire at 65, that runs to 95. If you retire at 55, it only runs to 85, and that's probably too short.

The Social Security Administration's planning guidance says about one in three 65-year-olds may live to at least 90 (Retirement Information for Medicare Beneficiaries, 2026). A plan that ends at 85 is quietly betting against a third of retirees.

Longer retirements push the safe rate down. In Early Retirement Now's study of 1,739 historical retirement start dates from 1871 to 2016, a 100% stock portfolio using the 4% rule succeeded 89% of the time over 30 years. Over 60 years, that dropped to 72%. If you're retiring in your 40s or 50s, expect your number to start with a 3.

Step 3: Decide what "safe" means to you

This step gets skipped the most. In Morningstar's research, "safe" means that in 90% of simulated futures there's still some money left after 30 years. In the other 10%, there isn't.

So picking a withdrawal rate also means picking how much risk of running out you'll accept. Aim for 95% and your rate goes down. Accept 80% and it goes up.

It also helps to know what "failure" looks like. Running out at 88 and running out at 70 both count as failures in a success rate. Living through them is very different.

That's where Monte Carlo simulation comes in. In plain terms, it runs your plan through a large number of possible market histories, some good, some bad, some ugly, and counts how many of them leave you with money at the end. The result is a probability, not a promise.

Step 4: Be honest about how flexible you are

Flexible spending is the main reason some published rates are higher. The best-known version is Guyton-Klinger "guardrails": if your current withdrawal rate drifts 20% above your starting rate, you cut spending by 10%. If it drifts 20% below, you give yourself a 10% raise.

Here's what that looks like in dollars (simplified, with no inflation adjustments):

• You start with $1,000,000 and take 5%, or $50,000.
• Markets fall and the portfolio drops to $800,000. Your $50,000 is now 6.25% of it, which is past the 6% upper guardrail. Spending drops to $45,000.
• Markets later rise and the portfolio reaches $1,300,000. Your withdrawal is now below the 4% lower guardrail. Spending rises by 10%.

Higher starting rates come with these pay cuts attached. Before you use a flexible-spending number, ask yourself whether you'd really make the cut, maybe more than once. If housing, insurance and health care take up most of your budget, there may not be much room to trim.

Step 5: Count health care as a real line item

Fidelity's 2025 Retiree Health Care Cost Estimate (July 2025) puts health care costs for a single 65-year-old at $172,500 over retirement. That covers Medicare premiums, deductibles and prescriptions, and it doesn't include long-term care at all.

Put these costs into your spending number on purpose. Don't assume they'll fit inside a round guess. Getting the spending side wrong throws off the rate just as much as getting the returns wrong.

Step 6: Consider when you're retiring and what your first few years look like

When you retire matters. Poor returns early in retirement do more damage than poor returns later, because you're selling investments while they're down. This is called sequence risk.

Market valuation plays a part too. Early Retirement Now found that over 30-year retirements with more than 40% in stocks, every historical failure of the 4% rule started when the market's CAPE ratio was above 15. CAPE compares stock prices to their average inflation-adjusted earnings over the past ten years. In plain terms, it measures how expensive the market is. Retiring into an expensive market is a reason to be a bit more careful at the start.

Then: aim for a range, and recheck it every year

Put the steps together and you'll get a range, not a single number. Fixed spending, a long retirement and a high success target sit at the low end. Real flexibility and other income move you toward the high end. Recheck it once a year. Your portfolio, your spending and your remaining time will all have changed.

The limits of any withdrawal rate

Be honest about the tools themselves. Every simulation depends on what it assumes about returns, inflation and volatility. In one simulation reported by Nasdaq, the 4% rule failed 13.7% of the time. A different set of assumptions would give a different figure. That doesn't make simulations useless. It means you should read a success rate as odds under certain conditions, not as a forecast.

That's how we built Monte Climb. The plan you build here runs your numbers through 1,000 simulated futures. It runs to age 95 by default, and you can extend it. It charges Medicare premiums and income-based surcharges year by year instead of using a flat guess. If you want to talk through the results, our AI planner William can answer questions like "Am I on track?" or "Retire at 62?" and shows his work.

Run your own numbers

You only need three numbers to start: your age, what you've saved, and what you spend each month. Our retirement calculator turns them into a success rate across 1,000 simulated futures. It runs in your browser, and nothing is saved until you say so.

Show my answer →

Monte Climb is planning software, not advice.

Frequently asked questions

Is the 4% rule still safe in 2026?

It depends on your assumptions. Morningstar's 2026 base case is 3.9% for a 30-year retirement with fixed, inflation-adjusted spending and a 90% success target. William Bengen, who created the 4% rule, now puts it closer to 4.7% using historical data and a more diversified portfolio. Flexible spending strategies can support a higher starting rate.

How do I calculate my withdrawal rate?

Divide what you withdraw from your portfolio each year by the portfolio's value. Taking $40,000 from $1,000,000 is a 4% withdrawal rate. Subtract Social Security, pension and other income from your spending first, because only the remaining gap comes from the portfolio.

What does a 90% success rate mean?

It means that in 90 out of 100 simulated futures, your money lasts for the whole planning period. In the other 10, it runs out at some point. A higher success target gives you a lower safe withdrawal rate. A lower target gives you a higher one.

Does retiring early lower my safe withdrawal rate?

Usually, yes. A longer retirement has to survive more market cycles. Early Retirement Now's historical research suggested about 3.50–3.75% for a 30-year retirement and about 3.25% for a 50–60-year retirement.

Does Social Security change my safe withdrawal rate?

It changes how much you need to take from your portfolio. The more of your spending that Social Security or a pension covers, the less your savings have to supply, so your withdrawal rate is lower for the same lifestyle.