Morningstar revises the IRA withdrawal rate for 2026

Retirees planning IRA withdrawals in 2026 may need to reset expectations about how much they can safely spend each year from their savings.

According to Morningstar’s latest State of Retirement Income research, the long-standing “4% rule” no longer holds up as a reliable benchmark for new retirees seeking predictable, inflation-adjusted income. Instead, Morningstar estimates that 3.9% is the highest safe starting withdrawal rate for someone beginning retirement today and planning for a 30-year horizon.

That translates to about $39,000 a year from a $1 million portfolio, excluding Social Security, pensions, or other guaranteed income sources.

Morningstar emphasizes that a safe withdrawal rate isn’t fixed. It changes with market conditions and personal circumstances, including:

• Stock market valuations
• Bond yields
• Inflation expectations
• Portfolio mix
• Length of retirement

Based on forecasts

Because retirees can’t know in advance how markets will behave over three decades, Morningstar relies on forward-looking forecasts rather than historical averages. Those forecasts incorporate expectations for investment returns, volatility, and inflation developed by Morningstar’s Multi-Asset Research team.

For 2025 and heading into 2026, Morningstar slightly increased its base-case withdrawal estimate—from 3.7% last year to 3.9%—largely because expected returns rose modestly across most asset classes. Inflation expectations also ticked up, to about 2.46%, which continues to pressure long-term spending power.

One surprising conclusion: holding more stocks doesn’t necessarily support higher withdrawals.

Morningstar found that portfolios with 30% to 50% in equities supported the highest safe withdrawal rates. Portfolios with heavier stock exposure actually saw lower safe starting withdrawals due to increased volatility, which raises the risk of early losses derailing a retirement plan.

Time horizon also plays a key role. Retirees with shorter expected retirements – typically older retirees – can safely withdraw more than 3.9%, while younger retirees need to be more cautious.

Flexibility can unlock higher spending

For retirees who bristle at the idea of a sub-4% withdrawal rate, Morningstar offers encouraging news: flexibility changes everything.

The research shows that retirees who are willing to adjust spending – cutting back slightly in weak markets and spending more in strong ones – can safely start with withdrawal rates closer to 6%. These flexible strategies reduce the risk of overspending during market downturns, especially in the critical early years of retirement.

However, Morningstar cautions that flexibility isn’t for everyone. The right approach depends on how much of a retiree’s essential expenses are already covered by guaranteed income, such as Social Security or annuities, and how comfortable they are with year-to-year spending changes.

Social Security decisions play a big role

Morningstar’s research also highlights the importance of coordinating portfolio withdrawals with other income sources.

Delaying Social Security or purchasing annuities can pair well with flexible withdrawal strategies by providing a larger base of guaranteed lifetime income. The trade-off: retirees who prioritize higher lifetime income often leave smaller bequests.

Morningstar’s message is clear: there’s no one-size-fits-all withdrawal rate. But for retirees starting withdrawals in 2026, 3.9% is the new conservative benchmark for stable, inflation-adjusted income.