I just retired at age 61 and left my $145,000 salary – how much can I pull from my nest egg every year without the fear of running out of money?

With a spouse, 55, who’s still working and contributing to a seven-figure retirement nest egg of their own, it looks like there’s really no need to fear running out of money. That is, unless they have plans to upgrade their lifestyle by a few notches after they’ve retired!

With hefty college expenses ahead for their child, though, the newly-retired individual should aim to keep their spending within the budget. Indeed, the college bills can really add up, especially if the child opts to get multiple degrees or even a PhD. In any case, our new retiree has ample liquidity (CDs and cash) to cover the difference if funds within the 529 come up short.

Ideally, it’d be best not to touch the portion of the nest egg invested in stocks, especially given the high chance of a correction as tariff tremors continue through March, April, and perhaps through the summer months.

With such hefty college expenses to think about and a lingering fear of running out of cash in retirement, I’d suggest being more conservative with the withdrawal rate. As always, check in with a financial advisor before making a move, as they can gauge your risk tolerance and fear levels better than I can!

In any case, the “4% rule” is a common rule of thumb followed by many retirees. The original 4% rule calls for withdrawing 4% of the initial portfolio value in the first year, then adjusting that dollar amount annually for inflation. If the math checks out ($3.6 million in total investable assets), a 4% withdrawal rate would entail just shy of $145,000 per year — a pretty handsome sum for a comfortable retirement.

Seeing as there’s an uptick in stock volatility and lofty expenses coming due in the near-future, in my opinion, I think skewing more towards a 3% (or a tad lower) withdrawal rate is prudent, given our retiree seems to be quite cautious (heavy exposure to risk-free assets like CDs, cash) and still a bit fearful of running out of cash in retirement. For a $3.6 million nest egg, a 3% withdrawal rate would entail drawing down $108,000 per year — still a very respectable sum. (Note that a 3% rate is generally considered very conservative. Historical simulations show 3% has a more than 95% success rate for 30-year retirements, even under poor market sequences.)

As always, see a financial advisor for the right withdrawal rate. If one’s annual expenditures are expected to be far less than $108,000, the option to go for an even lower withdrawal rate is there. Personally, I think anywhere from a 2.5-3.0% withdrawal rate makes sense.

In any case, the good news for our retiree is that their wife is still working and likely can continue working for another 5-10 years.

Should the market crumble and college expenses end up being higher than expected, the possibility for them to keep working is always there. It’s always nice to have such options. All considered, I’d say our new retiree is in great shape, with enough flexibility to consider a conservative withdrawal rate that’d allow for greater peace of mind in retirement.

Remember, a withdrawal rate isn’t set in stone! In fact, adjusting it on the fly based on the environment or expectation for large expenses could be the way to go. If stocks are reeling and tuition expenses are coming due, a lower withdrawal rate can make sense. It can always be increased later on (towards 4%) once one’s comfort level improves.