Safe withdrawal rate (sichere Entnahmerate)
A safe withdrawal rate is the percentage of an investment portfolio withdrawn in the first year of retirement under a plan designed to avoid exhausting the portfolio over a chosen period. Later withdrawals usually adjust the first year's euro amount for inflation. “Safe” describes the model's assumptions and success criterion. It does not guarantee the money will last.
Why it matters
Decumulation turns an uncertain portfolio into spending. Withdraw too quickly and the portfolio can run out while spending is still needed. Withdraw too cautiously and the household may unnecessarily restrict its life or leave more capital than intended.
The often-cited 4% rule came from historical US-market research. William Bengen tested withdrawals from stock-and-bond portfolios and found that an initial rate around 4% survived the historical 30-year periods in his dataset [1]. That result is a reference case, not a universal rate. International market histories produced weaker outcomes, and forward-looking estimates change with expected returns, inflation, portfolio mix, and the chosen probability of success [2][3].
How the withdrawal rule works
The starting rate is applied once, to the portfolio's value on the first day of retirement — that sets the first year's spending in euros. Every year after that keeps the same euro amount and simply adjusts it for inflation; the percentage is never recalculated against the new balance.
Walk one number through it. A €500,000 portfolio at a 4% starting rate gives €500,000 x 4% = €20,000 to spend in the first year. If inflation is 3% that year, the second year's withdrawal is €20,000 x 1.03 = €20,600 — whether the portfolio itself rose or fell. The rule adjusts what you take for the cost of living, not for how the market performed. That keeps real spending steady, but it also means withdrawals can keep climbing even after a bad investment year, which is exactly why setting the starting rate too high is dangerous.
What changes the rate
No withdrawal rate is safe without specifying the model. The same percentage can be cautious in one plan and fragile in another.
| Assumption | Effect on the plan |
|---|---|
| Longer retirement horizon | More years must be funded, so the initial rate usually needs more caution |
| Poor returns early in retirement | Withdrawals sell more assets at depressed prices; this is sequence-of-returns risk |
| Higher or persistent inflation | Inflation adjustments increase the euro amount withdrawn |
| Taxes, fees, and portfolio mix | They change the return available to fund spending |
| Pension or other reliable income | Less spending must come from the portfolio |
| Flexible spending | Temporary reductions after poor returns can improve resilience, but reduce spending stability |
| Desired inheritance | Preserving capital calls for a different success criterion than spending it down |
The phrase “4% withdrawal” can describe two different rules. The classic rule starts at 4% and then adjusts the euro amount for inflation. A constant-percentage rule withdraws 4% of the current balance every year. The second rule cannot mechanically exhaust the portfolio, but the income can fall sharply after market losses.
Worked comparison
Two households each start with €600,000. Household A uses a 4% initial rate and plans €24,000 of portfolio-funded spending in year one. Household B expects a 40-year horizon and wants a larger inheritance buffer. Using the same 4% merely because the portfolios match would ignore the different goals and time horizons.
The calculation is a stress test, not a verdict. Compare several rates, include taxes and costs, test weak early returns and higher inflation, and decide what “success” means: no exhaustion, stable spending, an inheritance floor, or a combination.
Check yourself
A retirement portfolio is worth €500,000 at the start of retirement. The plan uses a 4% initial withdrawal rate. What is the first-year withdrawal, in euros?
The first-year withdrawal is €20,000. Under the classic inflation-adjusted rule, inflation is 3% before year two. What is the year-two withdrawal, in euros?
A portfolio falls sharply during the first retirement year. What does the classic safe-withdrawal rule normally do in year two?
Which change generally puts more pressure on a fixed real withdrawal plan?
Sources
- William P. Bengen — Determining Withdrawal Rates Using Historical Data, Journal of Financial Planning, https://www.financialplanningassociation.org/learning/publications/journal/OCT94-determining-withdrawal-rates-using-historical-data (1994)
- Wade D. Pfau — An International Perspective on Safe Withdrawal Rates from Retirement Savings: The Demise of the 4 Percent Rule?, Journal of Financial Planning, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1699526 (2010)
- Morningstar — The State of Retirement Income: 2025, https://www.morningstar.com/content/cs-assets/v3/assets/blt9415ea4cc4157833/bltb73b87c5d0c70ead/692f43f57737a31596684522/working_file_11.19_FINAL_REVISE.pdf (2025)