What withdrawal rate is commonly considered sustainable in retirement planning?

• A. 6 to 8 percent per year
• B. 1 to 2 percent per year
• C. 8 to 10 percent per year
• D. 3 to 4 percent per year

Answer: (D)

In retirement planning, the aim is to withdraw enough to fund living expenses while not exhausting the portfolio too soon. A range of about 3 to 4 percent per year is commonly considered sustainable because it reflects a balance between taking enough income and preserving enough growth to outpace inflation over a multi-decade horizon. This aligns with the widely referenced starting point of around 4% in the first year, adjusted for inflation in later years, which serves as a practical benchmark for many portfolios. Rates higher than this, like 6–8% or 8–10%, raise the risk of depleting assets, especially if markets stumble early in retirement. Conversely, 1–2% would likely underfund long-term needs, given inflation and longevity. Of course, true sustainability depends on factors like asset mix, expected returns, inflation, and how long you expect to be in retirement, but 3–4% is a commonly used guideline.