How to calculate your withdrawal rate
The formula is one division; the work is deciding what belongs on each side of it. The top figure is the money that leaves your investments to be spent this year, including the income tax those withdrawals trigger. The bottom figure is the combined value of every account you draw from, measured once, at the start of the year. That is the same snapshot the IRS uses for required minimum distributions: the balance on December 31 of the prior year.
A few items are easy to misfile, and each one moves the result:
- Social Security, pensions, annuity payments and part-time pay are income, not withdrawals. They shrink what you need from the portfolio instead.
- Moving money between your own accounts is not a withdrawal. A Roth conversion, a rollover or a required distribution you reinvest keeps the money invested; only the tax paid from savings counts.
- Count 401(k)s, IRAs, Roth accounts, taxable brokerage and cash set aside for retirement spending. Leave out home equity unless you plan to sell or borrow against the home.
Initial vs. current withdrawal rate
Retirement research, including the 4% rule, talks about an initial withdrawal rate: the first year’s withdrawal as a share of the starting portfolio. After that, the dollar amount usually rises with inflation and the percentage is no longer used to set it. Your current withdrawal rate, this year’s withdrawal divided by this year’s starting balance, is a different number, and it drifts every year.
Suppose you retire with $1,000,000 and take $40,000. If the portfolio falls to $750,000 while your inflation-adjusted withdrawal grows to $41,200, your current rate is about 5.5%. After a strong decade it might be under 3%. Neither reading means your plan changed; the market moved around a fixed spending path.
That is why comparing a current rate with a safe withdrawal rate can mislead: safe-rate studies answer a question asked on the first day of a long retirement. Ten years in, the money has fewer years to last, so a higher current rate can be as sustainable as a lower initial one. The reverse also holds: a high current rate early in retirement, right after a market drop, is exactly the situation sequence of returns risk describes.
Withdrawal rates by age: what the IRS table implies
The IRS publishes one of the few official withdrawal schedules. For 2026, most traditional IRA owners’ required minimum distribution is the prior year-end balance divided by a divisor from the Uniform Lifetime Table in Publication 590-B; an owner whose sole beneficiary is a spouse more than 10 years younger uses a joint table instead. Turn the divisor upside down and you get a minimum withdrawal rate that climbs with age, because the remaining life expectancy it spreads the balance over keeps shrinking.
At 73, the divisor of 26.5 means taking about 3.8% of the balance; by 85 it is 6.25%, and by 95 more than 11%. RMDs begin at 73 for most people born 1951–1959 and at 75 for those born in 1960 or later. Roth IRAs have no RMDs during the original owner’s lifetime.
The table is a tax rule, not spending advice: its job is to make sure tax-deferred money is eventually distributed and taxed, not to make a portfolio last. It is still a useful reminder that a sustainable rate depends on how many years the money must cover. A 4% rate that looks cautious at 85 is a stretch at 45.
What moves your withdrawal rate over a retirement
Few retirees draw the same share every year. The rate tends to be highest in the gap years between leaving work and starting Social Security, then drops when benefits begin. Waiting to claim raises the benefit by 8% for each year past full retirement age, up to 70, so a retiree who bridges those years from savings accepts a high early rate in exchange for a lower one for life.
Taxes push the rate up. Every pre-tax dollar taken from a 401(k) or traditional IRA is taxed as ordinary income, so the withdrawal must cover the tax bill as well as the spending, while qualified Roth withdrawals come out tax-free. One-off costs, such as a roof, a car or a child’s wedding, create spikes. Fees act like a hidden extra withdrawal: a fund or adviser charging 1% a year takes it from the same balance. Spending itself often changes with age, a pattern known as the retirement spending smile.
So judge the path, not a single year: how high the rate climbs, when, and what the balance is at the peak.
Common withdrawal-rate mistakes
Most errors come from mixing figures built on different definitions, and they matter more than they look. The research range people compare against, roughly 3% to 5%, is only two points wide, so a slip of a full point can make a cautious plan look aggressive, or the reverse. The first two mistakes below push the rate in opposite directions, so a figure can contain both and still look plausible. Check yours against each:
- Dividing by the year-end balance, after the withdrawal has already left, which overstates the rate.
- Leaving out the tax on pre-tax withdrawals, which understates what the portfolio actually pays out.
- Counting Social Security or a pension as a withdrawal, which inflates the rate.
- Judging a current rate late in retirement, or a 40-year early retirement, by a benchmark built for 30-year horizons.
- Ignoring fund and advisory fees, which come out of the same portfolio.
Illustrative numbers
A couple’s withdrawal rate in their first retired year
- Withdrawals from investments
- Money taken out of your accounts to spend, including the income tax those withdrawals cause
- Portfolio value
- Combined balance of the accounts you draw from, usually as of December 31 of the prior year
The first retired year gives the initial withdrawal rate; every later year gives the current rate.
Portfolio on January 1$1,250,000
Planned spending for the year$96,000
Social Security and pension−$38,000
Estimated income tax on withdrawals+$7,000
Withdrawal from investments$65,000
Withdrawal rate ($65,000 ÷ $1,250,000)5.2%
Their rate is 5.2%, above the 3%–5% range where FINRA says expert opinion tends to cluster. When the second spouse’s delayed Social Security benefit of $20,000 a year starts, the draw falls to about $45,000 before any change in tax, or 3.6% of the same balance. The high rate is a bridge, not a permanent state.
At a glance
Minimum withdrawal rates implied by the IRS Uniform Lifetime Table (divisors used for 2026 RMDs)
| Age | Divisor (Table III) | Implied minimum withdrawal rate | RMD on a $500,000 IRA |
|---|---|---|---|
| 73 | 26.5 | 3.77% | $18,868 |
| 75 | 24.6 | 4.07% | $20,325 |
| 80 | 20.2 | 4.95% | $24,752 |
| 85 | 16.0 | 6.25% | $31,250 |
| 90 | 12.2 | 8.20% | $40,984 |
| 95 | 8.9 | 11.24% | $56,180 |
Put it in your plan
Withdrawal Rate in MoneyWhatIf
The Wellness scorecard’s average withdrawal rate card reads every retired year of your projection, divides each year’s draw by the balance that entered it, and rates the average against 4% and 6% planning marks. A required minimum distribution swept straight back into investments is left out, because that is a change of account rather than spending. The Taxes page lists a selected year’s withdrawal rate, and each Plan Resilience run you open has a strip of its yearly rate: green at or under 4%, amber above, red past 6%.
Common questions
Withdrawal Rate FAQs
What is a good withdrawal rate in retirement?
There is no single answer, because it depends on how long the money must last, how it is invested and how flexible your spending is. FINRA says expert opinion tends to cluster between 3% and 5% a year, and a 2011 GAO report found that the financial advisers it interviewed recommended 3% to 6% in the first year, with later withdrawals raised for inflation. Studies such as the Trinity study test figures like these against market history.
Do required minimum distributions raise my withdrawal rate?
Only the part you spend. An RMD must leave a traditional IRA or 401(k) and is generally taxed as ordinary income, but you can reinvest whatever you do not need in a taxable brokerage account. Your portfolio then shrinks only by the tax, so your true withdrawal rate is spending plus tax, not the RMD itself.
Should my withdrawal rate stay the same every year?
It depends on the method you follow. Under a fixed-dollar approach such as the 4% rule, the dollar amount follows inflation and the percentage drifts with the markets. Under a fixed-percentage approach, the rate stays put and your income rises and falls with the balance instead. Dynamic spending rules, such as guardrails, sit in between, holding spending steady until the current rate drifts past a set band.
How long will my money last at a given withdrawal rate?
It depends mostly on what your investments earn above inflation. If they only kept pace with prices, an inflation-adjusted withdrawal would last 100 ÷ the rate years: 25 years at 4%, 20 at 5% and about 16.7 at 6%. Turned around, that is the rule of 25. Real growth stretches those spans. In the Congressional Research Service simulations cited by GAO in 2011, a 4% first-year withdrawal lasted 30 years in 94.0% of runs, 5% in 77.0% and 6% in 49.5%.