‘Safe’ Withdrawal Rates

• The starting point is the standard retirement problem: given a certain amount of financial assets, how much can you spend each year without running out in your lifetime?
• The simplest type of solution takes the following form:
  • Start with x% of your assets, the ‘initial safe withdrawal rate’
  • Translate it to a dollar amount
  • Then, every year, grow that dollar amount with inflation
• But what is the initial withdrawal rate x? The grandfather (or grandmother?) of answers is the famous 4% rule
• Over the years, the financial advice industry has moved away from it, which is good – but where did they land?
• I reviewed the major providers (Vanguard, Fidelity, Charles Schwab etc.) to see what they say and if there is a consensus within the industry
• Only some providers answer the question directly (others want you to talk to them for a customized solution). Here is a summary

Safe Withdrawal Rate in % by Time Horizon as of June ’25

Notes: C. Schwab = Charles Schwab as of April 2025. M.Star = Morningstar as of January 2025. Fidelity: using their Retirement Planning Tool in June 2025. J.P. Morgan: from their Guide to Retirement 2025

• A few takeaways:
  • The major providers are more or less in agreement – that’s reassuring. MorningStar and Fidelity are very slightly more conservative than Charles Schwab
  • Note that for very long horizons, the safe withdrawal rate is closer to 3% than 4%. Those who think about early retirement should take this into account
  • Even at a 30-year horizon (a prudent number for many 65-year-olds), 4% is now considered too aggressive

Important: Your ‘safe spending rate’ is not the same is your safe withdrawal rate. Also, don’t take ‘safe’ too literally. See here for important notes and caveats.

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