Retiring in 2026? Here's How to Set Your First Year Withdrawal Strategy.

Retirement is definitely a milestone worth getting excited about. And if you’ve saved nicely, you may be looking at a generous nest egg to tap. But one of the most important things you can do to keep your retirement savings from running out is come up with a smart withdrawal strategy early on.

A lot of financial experts are fans of the 4% rule, which has you taking out 4% of your savings your first year of retirement and adjusting future withdrawals for inflation. But you may want to start with a smaller withdrawal percentage, or a higher one. Here are some factors to consider when setting a withdrawal strategy at the start of retirement.

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Your retirement age

If you’re retiring at a fairly average age (meaning, at some point in your 60s), you may feel comfortable sticking to a withdrawal rate around 4%. If you’re retiring at a later age than what’s typical, you may be able to take larger withdrawals, since your money won’t need to last as long. And if you’re retiring early, smaller withdrawals could be a safer bet.

Your spending needs

If you have a $3 million nest egg, the 4% rule allows you to withdraw $120,000 your first year of retirement. But if you expect to be able to cover your costs on $90,000 a year, then why withdraw extra if you don’t need to?

Think about what your bills look like, and factor in any additional spending you may want to do your first year of retirement, like travel. You may even decide to withdraw more money your first year of retirement but scale back once you’ve lived it up for a while.

Your investment mix

Your withdrawal rate should also hinge on how your portfolio is allocated. A very conservative portfolio gives you less leeway to take larger withdrawals. A portfolio that’s at least 50% stocks may be generating enough income to allow for a 4% withdrawal rate or higher.

Your estate planning goals

Some people view their nest eggs as money to get them through retirement. They’re OK with dying with $0 as long as they don’t run out while they’re still alive.

You may feel similarly. But if you’re hoping to reserve a portion of your IRA or 401(k) as an inheritance for your children or grandchildren, then that’s something you’ll need to account for when setting a withdrawal rate. And the more money you want to pass on, the more conservatively you might need to withdraw.

It’s important to get off on the right financial foot by coming up with a smart withdrawal strategy for your savings. But remember, you can also adjust that strategy as your needs and goals change. So don’t assume the number you land on now is the number you’ll have to stick to for the next few decades.