If You Have $1 Million in Retirement Savings, Here’s How Much You Could Withdraw Per Year

You’ve hit the million-dollar mark in your retirement savings. Congratulations! But now comes the tricky part: figuring out how much you can safely withdraw each year without running out of money.

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Let’s break it down with some expert advice.

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The 4% Rule: A Starting Point

Brandy Burch, CEO at Benefitbay, suggested starting with the tried-and-true 4% rule.

“If you’ve got $1 million saved up for retirement, a good rule of thumb is the 4% rule, which means you could withdraw about $40,000 per year,” she said. “This method aims to give you a steady income while keeping your nest egg intact over a 30-year retirement.”

But before you start planning your $40,000-a-year lifestyle, there’s more to consider.

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The Guardrails Method: A More Flexible Approach

Tyler Meyer, founder at Retire to Abundance, introduced us to a more dynamic strategy called the guardrails method.

“In our firm, we utilize the guardrails method which is based on the research of Jonathan Guyton and William Klinger,” he explained. “This method starts with an initial withdrawal rate, similar to the 4% rule, but includes ‘guardrails’ to adjust withdrawals annually based on the portfolio’s performance.”

According to Meyer, this method could allow for a higher initial withdrawal rate of about 5%, or $50,000 in the first year. But here’s the important part: It’s not set in stone.

“If the portfolio performs well, you can increase your withdrawals, potentially enjoying a higher standard of living,” he said. “Conversely, if the market underperforms, the method suggests reducing withdrawals to preserve the portfolio’s longevity.”

It’s all about working with what you have.

Know Your Spending First

Before you get too excited about withdrawal rates, Wayne K. Maslyk Jr., president and CEO at Great Lakes Benefits and Wealth Management, suggested taking a step back.

“First and most importantly, whether you’re a pre-retiree or a retiree, you must know where your money went for a 12-month period,” he shared.

Maslyk recommended a detailed review of your spending habits, including everything from housing and healthcare to those “Mom and Dad bailouts” for adult kids.

Once you have your number — whether it’s annually or monthly — you know what you need to live the way you want to live.