Q&A: How to plan retirement withdrawals

Dear Liz: I am 65 and plan on working until 70 to get the maximum Social Security. I have a 401(k) worth about $290,000. How do I determine the maximum monthly payout I should take while being somewhat certain it will last until I’m 90? Our family has a history of longevity, typically living into the early 90s.

Answer: You may have heard of the “4% rule,” a guideline that suggests an initial withdrawal rate of 4%, with the amount adjusted each year afterward by the inflation rate. The rule stems from research by certified financial planner Bill Bengen, who in a 1994 research paper used historic market returns for a portfolio consisting of 50% stocks and 50% bonds to determine the maximum safe withdrawal rate for a 30-year retirement.

Some researchers believe a sustainable withdrawal rate should start closer to 3%, and others suggest higher rates if the account owner is willing to cut back spending in bad years.

However, most retirement accounts, including 401(k)s, are subject to required minimum distributions. These will start after you turn 73. (For people born in 1960 or later, such distributions will be required starting at age 75.)

The exact amount you must withdraw depends on your account balance at the end of the previous year as well as your age and life expectancy. The percentages you must withdraw could be slightly less or considerably more than 4% of your original balance.


  1. RW Gonzalez says

    Do RMD’s apply if still working full time after 73, or can they be postponed without penalty until stopping from full time employment??
    Thank you!

    • Liz Weston says

      You don’t have to start taking RMDs from a 401(k) if you’re still working for the employer that provides it (and you’re not a 5% owner). You also don’t have to take RMDs from your Roth IRA or Roth 401(k). Otherwise RMDs start at 73.