Ridofranz / Getty Images Vanguard reports that one in four retirees don't touch their retirement savings at all during the first five years after leaving work.

Ridofranz / Getty Images

Vanguard reports that one in four retirees don’t touch their retirement savings at all during the first five years after leaving work.

  • Recent research shows that married retirees withdraw about 2.1% of their savings annually, while spending 80% of their guaranteed income, like Social Security.

  • Morningstar’s latest analysis suggests retirees can safely withdraw 3.9% to start, close to the classic 4% annual withdrawal rule

  • Those willing to adjust spending based on market conditions could take out up to almost 6%.

The 4% rule is one of the best-known in personal finance: it’s the percentage of your retirement savings you should withdraw in your first year. Every year afterward, you adjust the percentage for inflation, and, if you have enough saved, your money should last for your retirement. But recent research shows many retirees aren’t even close to this traditional guideline.

A 2025 study in Financial Planning Review by David Blanchett and Michael Finke found that married 65-year-olds with at least $100,000 in assets withdraw just 2.1% per year from their retirement accounts. Single retirees take out even less, about 1.9%. Meanwhile, retirees spend about 80% of their guaranteed income, like Social Security, but only ever expend about half of their retirement savings.

The result is that while most people fear they won’t have enough to retire on, many retirees are living more frugally than they might need to, potentially missing out on experiences they spent a lifetime saving for. But for others, a lower withdrawal rate isn’t unfounded—it’s prudent based on the math of trying to float a retirement with less.

We take you through what you need to know below.

Reviewing the accounts of 70,000 retirees age 60 and over, Vanguard’s findings reveal just how cautious—and inconsistent—many retirees are in taking withdrawals:

Only about a third withdrew money during each of the years Vanguard reviewed, and just 20% of that group maintained a steady withdrawal rate considered to be between 3% and 10% annually.

The median retiree in Vanguard’s sample had a 401(k) balance of $133,000 at retirement, about 2.2 years’ worth of income. It’s no surprise that those who cashed out entirely tended to have smaller balances and lower income before they retired.

That $133,000 median balance is a critical detail. At the traditional 4% withdrawal rate, that provides about $5,300 a year—helpful for paying bills, but not nearly enough to fund a retirement. For retirees with more modest retirement savings, cautious spending isn’t a psychological quirk but a prudent approach to having fewer resources.

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Analyses calling for retirees to spend more tend to reflect wealthier households with 401(k) account balances in the high six figures or more, rather than the more typical American who relies almost entirely on Social Security for their retirement.

According to a 2025 Employee Benefit Research Institute (EBRI) survey, about half (46%) say they spend less than they could because they’re worried about running out of money.

This helps explain why having a guaranteed income changes retiree spending so dramatically: Retirees aged 65 to 69 with $100,000 to $500,000 in savings withdrew just 2.7% annually if their guaranteed income (Social Security or pensions) was between $25,000 and $35,000.

Those with a guaranteed income above $50,000 withdrew 6.0%—more than double. The security of a larger “paycheck” seems to give them “permission” to tap their savings.

Retirees often spend far less from savings than economic theory predicts. For many Americans, it’s because they have less savings. But others spend less because of a “tendency to view a withdrawal from savings as a loss,” according to Blanchett and Finke. Experts call this the “decumulation paradox.”

If 2% is probably too conservative for some, then what’s a safe withdrawal rate?

Morningstar’s 2026 State of Retirement Income report suggests that 3.9% is a reasonable starting point for retirees seeking a 90% probability of not running out over 30 years. The analysis assumes a balanced portfolio (holding about 30% to 50% in stocks) and fixed, inflation-adjusted withdrawals.

But retirees willing to be flexible can withdraw significantly more. Morningstar tested several strategies that adjust spending based on market performance. Two approaches, the report argues, can lead to starting withdrawal rates as high as 5.7%:

  • Constant percentage method: You withdraw a fixed percentage of your portfolio balance every year. If your portfolio drops 20%, your withdrawal will also drop 20%. If it rises, you get a raise. This method includes a floor so your income never falls below 90% of your initial withdrawal.

  • Endowment method: You withdraw a percentage based on the average value of your portfolio over the past 10 years. This smooths out the year-to-year swings, but your income will still vary.

The trade-off is some unpredictability, so these strategies would likely work best for retirees whose Social Security and pension income already cover essential expenses, such as housing, food, and healthcare.

If your fixed costs are covered, fluctuating portfolio withdrawals are easier to accept because you’re funding travel and hobbies, not necessities like your electric bill.

Read the original article on Investopedia