How Much of Your 401(k) to Withdraw Each Year in Retirement

by Jack Ori
Talking to a financial adviser can help you plan your retirement savings strategy.

Talking to a financial adviser can help you plan your retirement savings strategy.

When you first start working, retirement seems far off and you might not expect to ever see the money you put in your 401k again. However, once you turn 59 1/2, you can start withdrawing your 401k funds without tax penalty, and once you turn 70 1/2, you have to start withdrawing them. You shouldn't withdraw more than 4 percent of your retirement funds each year if you want your retirement account to last for the rest of your life.

Safe Withdrawal Rate says that it's not safe to withdraw more than 3 percent to 4 percent of your 401k balance each year. If you withdraw more than this amount, you run the risk of running out of money in your account, especially if you live longer than average. If you withdraw no more than 3.5 percent of your retirement income each year, your account will last at least 50 years, according to Steve Vernon.

Retirement Age

You can withdraw a larger amount safely if you defer your retirement. If you don't retire until you are 70, you can withdraw more each year than you can if you retire at 60. The later you wait, the more you can withdraw each year, since your life expectancy is a little shorter than it would be if you retired at an earlier age.


Your ability to withdraw money from your retirement account depends in part on your investment portfolio. 50-50 allocations are slightly less risky than 75-25 allocations because you are putting less of your money, and therefore less of your faith, in one investment. Thus, if your retirement account portfolio has a 50-50 allocation, you may have more money in the account when you retire and therefore be able to safely withdraw a little more money.


Negative events beyond your control can always affect your retirement savings. For example, in the 1970s, the stock market fell and inflation rose, which was bad news for investors. Thus, sticking to the 4 percent rule even if you retire late and have a strong portfolio and lots of money may be your best defense against sudden economic downturns. In addition, if you are in good health you may live a long time after retirement, so it may not be a good policy to take out a large amount each year if you retire very late in life.

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