​How much can you spend in retirement?​

If there is one topic where it’s possible to find an answer you want to find, it is retirement income planning. No wonder people get confused. No wonder so many people trying to figure out their retirement are stressed – and too frequently enter retirement unprepared for the future.

The typical retirement plan assumes a thirty-year period – 65 to 95, but these days I hear more about individuals who plan to retire in their fifties. The younger one retires, the more difficult the planning – and the more money needed.

The income you need in retirement is the income you are living on immediately before retirement. You are not going to spend significantly less. In fact, during the early years of retirement you may spend more. That accounts for elimination of payroll taxes, reduced – but not elimination of – saving and even no work related expenses. Forget the advice you can live comfortably in retirement on 70-80% of pre-retirement income. Those amounts leave nothing for discretionary spending, limit your ability to deal with inflation or financial emergencies – or require a reduction in your standard of living.

Accumulate sufficient assets so that your assets – not just retirement funds – together with Social Security or other steady income – generate 100% income replacement.

Following is an excerpt from an interesting article. The article also contains a table showing prudent withdrawal rates based on investment mix and years expected in retirement.

The most difficult and important issue among those near or in retirement is “How much of my savings can I spend each year without running out of money?” Morningstar, the financial research company, has done some outstanding work recently to answer this question. Hint: It’s not the same for everyone. The research was published in The State of Retirement Income: Safe Withdrawal Rates, by Morningstar experts Christine Benz, Jeffrey Ptak and John Rekenthaler. 

Benz told me this is such a difficult issue because of four critical unknowns:

What will future market returns be for stocks and bonds?

What will the rate of inflation be during retirement?

Will we spend more or less as we age?

How long will we live and, therefore, need our nest egg to last?

No one knows the answers to these questions. I’ve found that people who retire young tend to spend more money than when they worked, as they now have more time to do things that cost money, such as travel.

And while no one knows how long each of us will live, it’s clear that a 90-year-old will, on average, have a shorter life expectancy than a 60-year-old. That means the 90-year-old can spend a higher percentage of his nest egg than the 60-year-old. 

There are a couple of critical points to understand. The first is that when estimating how much one can spend, we must take inflation into account. If we have an average of 2.21 percent annual inflation (assumption used by Morningstar), what costs $100 today will cost an estimated $155 in 20 years. The second point is that while stocks will, on average, produce higher returns than bonds, stocks are also riskier than bonds.

Source: How much can you spend in retirement?


  1. This is my most pressing matter right now needing to know safe withdrawal rate(as much as possible).
    I just pulled the plug on my job on 12/31/21 and am needing some guidance. I have been reading you for a year now and like your no nonsense approach to realities of life.
    I have too much data to share here. Do you have another way to be reached?


  2. I have been reading a lot of material on retirement withdrawals since before 2000 and the discussions have beaten the 4% withdrawal to death as well as how much is needed to retire.

    I finally concluded that the IRS rmd table is as good as any to use as a guide. Most people have tax deferred savings so must use it and it will work as well for post tax savings.

    I’ve been retired over 15 years and could not have predicted the years of almost 0 interest on bonds and money market funds, the decline and recovery of equities after the Great Recession and the low inflation rate up until the last year. My accounts have soldiered on and so far so good. Over thinking can be unproductive.

    I did start out with less than my annual pay and have not missed a beat as far as standard of living.


    1. You can find recent articles saying 4% is too high and too low. It’s a guideline. If a person doesn’t need 4% of their assets, no need to take it or don’t adjust every year for inflation. Of course RMD tables only kick in at age 72, but they quickly exceed 4% as you age. I still maintain to keep it simple. Aim for 100% of pre-retirement base income replacement from all sources. Seems to me if I’m wrong there is no risk, but if 70-80% is wrong over 30+ years, it’s a problem.


  3. Not really on-board with the “replace your income” hypothesis. I have no mortgage or credit card debt, and save a very large percentage of my income today. So I agree I may spend more in retirement than I do today – especially early on when able to travel extensively – but I don’t need to replace anywhere near 80% of my income…let alone 100%.


    1. Time will tell. I include some level of ongoing saving. If you already have no debt, nothing much will change in retirement. I also see the 100% goal as a cushion for inflation, market fluctuations, emergency expenses.


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