I Waited Until 75 to Retire With $1.4 million. Do I Have to Follow the 4% Rule, or Can I Take Larger Withdrawals?

Question: I waited until 75 to retire with $1.4 million. Do I have to follow the 4% rule, or can I take larger withdrawals since I'm older than the typical retiree?

Answer: Some people opt to retire at age 62 because that's the earliest age to claim Social Security. Others like to wait until 65 because that's when Medicare coverage begins.

A 2024 MassMutual survey found that retirees and pre-retirees alike think 63 is an optimal retirement age. But ultimately, it's your decision when you want to retire. And if you enjoy your job and are able to keep at it, you may find that there are benefits to working well into your 70s.

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Not only does that allow you to keep growing your savings, but it could also make it possible to delay your Social Security claim beyond full retirement age to boost your monthly benefits. And studies have shown that working longer can be good for your mental and physical health, especially for men.

If you're retiring at 75 with $1.4 million, you may be hoping to make the most of your nest egg. And you may be wondering if the popular 4% rule (which recommends withdrawing 4% of your retirement savings annually) is one you need to follow given that you're retiring later than most.

The quick answer is, you don't necessarily have to stick to the 4% rule. But that actually holds true regardless of your retirement age. In fact, rather than feel constrained by the 4% rule, you're better off coming up with a withdrawal strategy that's more customized to you.

Don't just follow a broad rule of thumb

While the 4% rule has long been hailed as an optimal withdrawal strategy for retirees for its ease of use, that doesn't make it right for everyone. And it may especially be the wrong strategy for you if you're retiring at 75.

Jim Davis, CFP and senior wealth adviser with Aspen Wealth Management, says that regardless of when you're retiring, two retirees with the same nest egg can have very different needs.

"Personal finance is personal," he insists. "Retirement income should follow suit."

Davis also says, "Health status, longevity expectations, and legacy goals all play a meaningful role in determining what’s appropriate."

Before you decide on a withdrawal rate for your savings, calculate your income needs and figure out what you want to do over the next few years.

"Many of our clients spend more early on in their 'go-go' years … before settling into their 'slow-go' phase," Davis says. If that's your intention, you can create a withdrawal strategy that's adaptable to your specific spending plans.

In fact, Davis says, it's generally good to use the 4% rule as a starting point, not an absolute.

"We don’t treat it as something carved in stone," he insists. "Instead of locking into a fixed payout forever, we start with a sensible distribution rate and then adjust it over time. If markets cooperate and the plan is running ahead, you may be able to give yourself a raise. After a tougher stretch, you scale back slightly to protect long-term sustainability."

You can start out with larger withdrawals — but be careful

Following the 4% rule gives your savings a strong chance of lasting at least 30 years. But if you're retiring at 75, you may not be looking at that many years of withdrawals. So you may want to give yourself the green light to tap your nest egg more aggressively, especially if that allows you to live the retirement you want after a very long career.

"Retiring at 75 completely invalidates the 4% rule as a restriction," says Mark Sweeney, co-founder of Longevity Wealth Strategies. "For someone retiring at 75 with $1.4 million, research suggests that a sustainable initial withdrawal rate can rise into the 5% to 7% range."

As Sweeney points out, "That's an immediate $70,000 to $98,000 per year, compared to the $56,000 the 4% rule would suggest."

However, Sweeney warns that you still need to manage your nest egg carefully, especially since you could face accelerating health care costs later in life. He also says it's important to implement a flexible guardrails approach that can tighten withdrawals or pause inflation adjustments in a down market.

Think about your legacy goals

Managing your nest egg isn't just a matter of figuring out how much to withdraw each month or year in retirement. It's also about determining what purpose you want that money to serve.

Sweeney says that before you start tapping your savings, it's important to clearly define your legacy goals.

"If leaving a sizable inheritance is a high priority, you should aim for the lower end of the sustainable withdrawal range," he says. "If your priority is lifestyle, you can confidently target the higher end, especially if your guaranteed income covers most basic expenses."

It's all about flexibility

Critics of the 4% rule are often quick to point out that it lacks flexibility. So ultimately, Davis says, the best course of action is to use 4% as a reference point but make adjustments as necessary.

"By age 75, the real question isn’t, 'Do I have to follow the 4% rule?' It’s, 'What flexible spending path fits my health, income sources, and goals for the future?'" Davis says. "That’s the kind of retirement math that reflects how life actually unfolds."

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