Retiring Soon: Report suggests a 3.9% starting withdrawal rate challenges the 4% rule

A Morningstar report recommends a 3.9% first-year withdrawal, adjusted for inflation, and finds a 90% probability of success over a 30-year retirement for portfolios with 30–50% stocks; the report also says delaying Social Security to age 70 raises lifetime spending but may require temporary bridge strategies.

Morningstar's new report proposes a 3.9% first-year withdrawal rate for retirees, followed by annual inflation adjustments. The recommendation is offered as a revision to the long-standing 4% rule and is modeled over a 30-year retirement horizon. The researchers assumed portfolios holding roughly 30% to 50% stocks, with the remainder in bonds and cash. The report also highlights that delaying Social Security to age 70 can boost lifetime spending but may require temporary spending reductions or bridge income approaches. Reported findings: - Morningstar recommends a 3.9% initial withdrawal and then annual adjustments for inflation. - The 3.9% starting rate showed a 90% probability of success over 30 years under a modeled portfolio with 30–50% in stocks. - The report gives a practical example: a $1 million portfolio would yield $39,000 in the first year and about $39,959 the next year assuming 2.46% inflation. - The researchers note that taxes and fees affect outcomes, and they contrast tax-free Roth IRA earnings withdrawals with ordinary income taxation of traditional 401(k) withdrawals. - Delaying Social Security to age 70 is reported to raise total lifetime spending, and the report offers bridge strategies for the period between ages 67 and 70. Summary: The report reframes the familiar 4% rule by proposing a slightly lower 3.9% starting withdrawal and emphasizes how Social Security timing and account tax treatment affect lifetime retirement income. Researchers present bridge strategies for people who cannot delay benefits to age 70, and they stress that taxes, fees and portfolio composition influence results.