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Ditch the 4% rule: 3.7% is the new magic number for retirement withdrawals, says Morningstar

Retirees seeking the highest level of lifetime income should consider a combination of delayed Social Security filing and a flexible withdrawal strategy, according to a new Morningstar report.

By Lynn Cavanaugh | January 08, 2025 at 11:15 AM
Credit: Vitalii Vodolazskyi/Adobe Stock

Retirees spending from an investment portfolio often balance two competing priorities: maximizing their own consumption vs. leaving behind an inheritance for loved ones. Morningstar’s 2024 State of Retirement Income report introduces a new metric, the “spending/ending ratio” that can help retirees assess how various spending strategies balance these outcomes.

While the ideal spending/ending ratio and overall spending strategy will differ for each individual, this year’s research suggests that new retirees searching for a safe starting withdrawal rate should go no higher than 3.7%.

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