Morningstar Safe Withdrawal Rate for 2026: What Retirees Need to Know Now
If you’re planning to retire in 2026, Morningstar just released one of the most important updates you’ll read all year: their new Morningstar Safe Withdrawal Rate estimate. The report—The State of Retirement Income: 2025 Edition—dropped on December 3, 2025, and it’s already shaping the conversation for future retirees.
Here’s what the new number means, why it’s higher than last year’s estimate, and what real people should actually do with this information. I go through the new update in the video, and blog below.
Morningstar Raises the Safe Withdrawal Rate to 3.9%
Morningstar’s base-case safe withdrawal rate for a 30-year retirement in 2026 is 3.9%.
That’s up from 3.7% last year—even though stocks are higher and bond yields have dipped.
So what changed?
Morningstar uses forward-looking return assumptions, not historical returns like the original 4% rule. Their research models future asset class returns, inflation expectations, market volatility, and spending risks to project a withdrawal rate that has a 90% probability of lasting through a 30-year retirement.
It’s important to pause here:
A 90% success rate still means a 10% failure rate.
This is one reason Morningstar emphasizes flexibility rather than clinging to a single number.
What Morningstar Means by “Safe Withdrawal Rate”
In the Morningstar framework, the safe withdrawal rate is:
“The highest starting withdrawal rate for retirees seeking an inflation-adjusted paycheck with a 90% probability of having funds remaining at the end of a 30-year retirement.”
So Morningstar’s Safe Withdrawal Rate assumes:
- Steady, inflation-adjusted spending
- A 30-year retirement
- No adjustments along the way (other than inflation-adjusted spending)
- Market conditions that may or may not happen in real life
If you live longer, retire early, or face higher-than-expected expenses (like long-term care costs), your personal safe withdrawal rate may need to be much lower.
This is why the Morningstar report—and my own planning philosophy—pushes retirees toward dynamic withdrawal strategies instead of fixed rules.
What Portfolio Mix Supports the New Morningstar Safe Withdrawal Rate?
Morningstar found that the highest safe withdrawal percentages occur when retirees hold:
• 30% to 50% in stocks
• The rest in bonds and cash
This surprises many people.
Some assume retirement means holding fewer stocks. Others assume more stocks equals more growth equals higher withdrawal rates.
But Morningstar’s data shows that too many stocks introduce volatility, making you more vulnerable to something called sequence-of-returns risk—the danger of poor returns early in retirement.
This aligns with what many researchers call the Retirement Red Zone:
the five years before and the five years after retirement where bad markets do the most damage.
Why Flexible Spending Beats Fixed Rules
Morningstar highlights four major real-world risks that break retirement plans:
- Poor market returns
- Higher-than-expected inflation
- Retiring earlier than planned
- High long-term care expenses
You can’t manage these risks with a rigid 4% rule.
That’s why the report emphasizes flexibility:
Guardrails
If markets are strong → give yourself a raise
If markets fall → tighten your spending a bit
Skip-the-Raise Years
If inflation or markets move the wrong way → pause your annual increase
Realistic Spending Patterns
Most retirees don’t keep spending at the same inflation-adjusted level forever.
Morningstar—and David Blanchett’s “retirement spending smile”—both show spending tends to naturally fall in later years.
Morningstar even suggests that simply acknowledging this pattern can raise your starting withdrawal rate by about 1% from 4% to 5% without raising the risk of running out.
The TIPS Ladder Question: Why Not Just Take 4.5%?
Morningstar also examined a 30-year Treasury Inflation-Protected Securities (TIPS) ladder.
As of September 30th, the inflation-adjusted withdrawal rate is 4.5%.
So why not put everything in a TIPS ladder and lock in 4.5%?
Because:
✔ A TIPS ladder is self-liquidating
At the end of 30 years, the money is gone. Completely.
There’s no flexibility, no ability to adapt, and no cushion if you live longer.
✔ It removes growth potential
You lose out on the chance that markets outperform expectations.
✔ It doesn’t solve long-term care or longevity risk
TIPS ladders are a tool—not a plan.
Annuities and Delaying Social Security Can Increase Safe Withdrawal Rates
Morningstar suggests two ways to increase lifetime income:
- Delay Social Security (often the highest-value decision a retiree can make)
- Add an immediate or deferred income annuity to create a baseline income floor
These aren’t universal solutions, but in the right situations, they absolutely strengthen a retirement plan.
Historical vs. Forward-Looking: Morningstar vs. Bill Bengen
It’s worth comparing two approaches:
Bill Bengen’s 4% Rule
Looks backward at historical returns
Updated research has pushed his figure closer to 5%
Morningstar Safe Withdrawal Rate
Looks forward using projected returns
Current estimate: 3.9%
Neither method is perfect.
Both make assumptions.
The key is understanding what each one assumes—and applying the right one to your life expectancy, risk tolerance, and spending goals.
Where Retirees Go Wrong
Morningstar’s research shows the most common shocks that derail retirements:
- Retiring earlier than expected (common by about 3 years)
- Market declines early in retirement
- High inflation
- Long-term care events
These aren’t edge cases—they’re realities for many American retirees.
This is why Step 5 in my book Retire Today is all about planning for the risks that blow up retirement plans.
Withdrawal rate research is helpful—but only if you plan for the actual threats you’ll face in real life.
What Dynamic Withdrawal Strategies Mean for You
Morningstar compared multiple withdrawal strategies and found:
- A fixed 3.9% withdrawal gives you a steady paycheck and the highest ending balance
- Guardrail strategies give you more income but a lower ending balance
- Flexible strategies generally improve outcomes but require discipline
- The “best” strategy depends on what you value more:
– maximizing your lifetime income, or
– maximizing what you leave behind
This lines up with a question I ask on my podcast all the time:
With Your Retirement Plan: what are you actually solving for?
A withdrawal strategy only works if you know your goal.
Bottom Line: How Should You Use the New Morningstar Safe Withdrawal Rate?
Morningstar’s 3.9% estimate is useful—but it is not a retirement plan.
You should use it as:
- A starting conversation, not a rule
- A way to understand the trade-offs between risk and spending
- A reminder that flexible withdrawals beat rigid rules
- A prompt to plan for real-world risks like early retirement, inflation, and long-term care
If you want a retirement plan that goes deeper than a single number, I wrote Retire Today: Create Your Retirement Master Plan in 5 Simple Steps to help you build a practical, flexible framework for retirement income, taxes, investments, and risk planning.
You can find details and resources at JeremyKeil.com.
Next Steps for You
If you want to understand how Morningstar’s withdrawal rate applies to your money:
- Download the Morningstar report
- Read chapter 3 and step 5 of Retire Today
- Schedule a call with our team at Keil Financial Partners
- Build a flexible plan that adjusts with the markets—not against them
And be sure to subscribe to the Retire Today Podcast and the Mr. Retirement YouTube channel for ongoing updates.
Your retirement deserves more than a rule of thumb.
It deserves a retirement master plan.
About the Author:
Jeremy Keil, CFP®, CFA® is a financial advisor in Milwaukee, WI, author of the bestseller Retire Today: Create Your Retirement Master Plan in 5 Simple Steps and host of both the Retire Today Podcast and Mr. Retirement YouTube channel
Additional Links:
- Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
- Morningstar Report “The State of Retirement Income for 2026”
Connect With Jeremy Keil:
- Keil Financial Partners
- LinkedIn: Jeremy Keil
- Facebook: Jeremy Keil
- LinkedIn: Keil Financial Partners
- YouTube: Mr. Retirement
- Book an Intro Call with Jeremy’s Team
Media Disclosures:
Disclosures
This media is provided for informational and educational purposes only and does not consider the investment objectives, financial situation, or particular needs of any consumer. Nothing in this program should be construed as investment, legal, or tax advice, nor as a recommendation to buy, sell, or hold any security or to adopt any investment strategy.
The views and opinions expressed are those of the host and any guest, current as of the date of recording, and may change without notice as market, political or economic conditions evolve. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results.
Legal & Tax Disclosure
Consumers should consult their own qualified attorney, CPA, or other professional advisor regarding their specific legal and tax situations.
Advisor Disclosures
Alongside, LLC, doing business as Keil Financial Partners, is an SEC-registered investment adviser. Registration does not imply a certain level of skill or expertise. Advisory services are delivered through the Alongside, LLC platform. Keil Financial Partners is independent, not owned or operated by Alongside, LLC.
Additional information about Alongside, LLC – including its services, fees and any material conflicts of interest – can be found at https://adviserinfo.sec.gov/firm/summary/333587 or by requesting Form ADV Part 2A.
The content of this media should not be reproduced or redistributed without the firm’s written consent. Any trademarks or service marks mentioned belong to their respective owners and are used for identification purposes only.
Share:
View/Listen to Retire Today on:
