Strategies to help ensure you don’t deplete your retirement savings too early

September 16, 2022
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Key Takeaways:

  • You may be wondering how to ensure that you’ll have sufficient funds to live comfortably in retirement—and although there isn’t a one-size-fits-all approach—there are a few well-known tricks to help you make the most of your retirement savings.
  • The 4% rule is a general retirement guideline suggesting that you can safely withdraw funds equal to 4 percent of your savings during your first year of retirement and then adjust that level of income for inflation each year after for 30+ years. The 4% rule is more of a benchmark or gauge than a steadfast rule—especially in today’s environment—so its important to consult a financial professional for additional guidance.
  • By considering the 4% rule, you can better estimate how much income you can safely receive from your current level of retirement savings.

What is a safe amount to withdraw each year in retirement?

The Center for Retirement Research at Boston College has found that many older Americans could be at risk of emptying their accounts by age 85, although half of them will live beyond then.[1] To avoid emptying your account prematurely, the 4% rule can serve as a guideline for how to withdraw your savings each year in retirement. The 4% rule comes from a 1994 study by William Bengen, a financial professional from Southern California, who determined that a 4% withdrawal rate from a diversified investment portfolio, with annual withdrawal increases to keep pace with inflation, would last 33 years. He believed this would be the “worst case” scenario and suggested 5% was likely attainable.

Despite its performance in these studies, there is general agreement in the retirement industry that the 4% rule is more of a benchmark than a steadfast rule. In today’s environment, it may be wise to consider the 4% withdrawal amount as a maximum withdrawal amount in the first year of retirement. Why? Stock prices have come down from all-time historical highs, interest rates are rising, and inflation is high. The likelihood is that price volatility for stocks and bonds remains high, so this makes certainty an important component of an individual’s retirement income generation strategy.

How do I plan for retirement expenses?

Say you have $500,000 in savings at retirement. Based on the 4% rule, you would need to be able to withdraw no more than $20k that first year of retirement from your savings or you’d risk running out of money in the future. Sure, this amount would be in addition to other income sources like your Social Security retirement benefits, so you may wonder, “how do I know how much I’ll likely spend each year?” It can be helpful to first consider all essential retirement expenses unlikely to ever go away. 

These are often things like:

  • Housing and utilities
  • Transportation
  • Groceries and household goods
  • Health care and long-term care (premiums, co-pays, prescriptions)
  • Insurance premiums
  • Loans or other debt payments

You can use an income planning worksheet to create your estimate, then review if following the 4% rule could produce enough annual income to sufficiently cover your retirement expenses. Assuming it does, next you can consider anticipated discretionary retirement expenses and how they may change throughout retirement as activity levels may change.  Discretionary expenses considered by most retirees may include:

  • Travel
  • Entertainment
  • Philanthropy or gifts to family

Pros and Cons of following the 4% rule

Financial professionals generally recommend the 4% rule because of its advantages, for example, how its:

  • Easy to understand and implement
  • Adjusted year-over-year for inflation
  • Designed to provide income for 30+ years
  • Considered a conservative approach (higher income levels may be obtainable)

There is concern, however, that the 4% rule doesn’t account for the goals of the retiree, asset location, or taxation. It also doesn’t account for goals outside of retirement income such as leaving money to heirs or supporting charities. In addition, location of assets is generally not considered in the 4% rule. Imagine you held the bulk of your assets in traditional IRAs—taxation of your withdrawals will impact your actual spendable income. These risks should be considered with other potential pitfalls, including that the 4% rule:

  • Is not always followed year after year in retirement
  • Doesn’t account for needed emergency expenses
  • Provides no guarantees the portfolio won’t run out of money
  • Lacks flexibility

How to generate additional income from your retirement savings

There are several ways to generate income from your retirement savings to better ensure you’re on track for a more predictable level of income in retirement.  Your withdrawal strategy becomes an important part of retirement planning and income strategy. We’ve already mentioned the 4% rule, but other popular options include account sequencing and the bucket method, described in more detail here.

Ideally, you should begin thinking about a withdrawal strategy as early in your career as possible, since it can impact how you save for retirement. However, it’s not too late to create a strategy even if you’re closer to retiring or have already retired.

One size does not fit all

Everyone’s situation is different and adequate planning is key. There isn’t one specific strategy that works for each individual situation, but for most, having a protected source of income to cover your regular expenses is key.

Considering tax-efficient withdrawal methods and using the 4% rule for a portion of the portfolio may together provide desired levels of income for decades. However, especially for those near retirement during periods of high inflation and market losses, the risks may be too high to fully trust the 4% rule on its own. For these retirees, greater levels of protected retirement income may be needed.

If you’re unsure if your savings can generate the income you need or want in retirement, talk to your financial professional about new guaranteed income solutions that might be available, which can add on to your Social Security retirement benefits and give you added confidence that your savings will be sufficient. Guaranteed income products can help provide certainty in volatile times. Nationwide provides a variety of guaranteed income solutions that may help meet your goals—talk to your financial professional or learn retirement savings tips at

Nationwide provides a variety of guaranteed income solutions that may help meet your goals. Talk to your financial professional or learn retirement savings tips at

URBO#: NFM-22367AO

[1] Can We Predict Boomers’ Drawdown Behavior from Earlier Cohorts? (

Disclaimer: Investing involves market risk, including possible loss of principal. No investment strategy or program can guarantee to make a profit or avoid loss. Actual results will vary depending on your investment and market experience.

Nationwide and its representatives do not give legal or tax advice. An attorney or tax advisor should be consulted for answers to specific questions.

  • Planning Retirement