What’s Your Retirement Number? Don’t Just Go by the 4% Rule
To help make sure your retirement income covers your needs and lasts for a lifetime, you need a custom plan. The 4% rule of thumb is a handy starting point, but it’s too general. Get specific to find your very own retirement number.


Numbers rule our retirement decisions, and we usually have questions about them. At what age will we stop working full time? How long of a retirement should we plan for? What do today’s low interest rates mean to our future income? Can we count on a reasonable dividend yield from our stock portfolio? What percentage of our income should be guaranteed for life, through Social Security, pension income and annuity payments?
Dollars or Percentages
We also look at retirement income as both dollar amounts and percentages. Should we try to replace 100% of our former income during retirement? Or should we set a fixed budget and find a way to meet that amount? You can determine which approach appeals to you by thinking about your last mortgage refinance. Did you congratulate yourself for shaving a percentage point or two off the mortgage rate, or plan for ways to spend the extra $300 you saved every month?
Common Retirement Measure: 4% Rule of Thumb for Starting Income Percentage
The 4% rule of thumb is another percentage, and it looms over the majority of retirement decisions. This is the rule that says people with a reasonable amount of savings when they retire should be able to make that pot of money last for 30 years even as they remove 4% of the total each year for living expenses. Studies have shown that three-quarters of all financial advisers rely on the 4% rule when offering guidance to their clients.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There’s just one problem. Baby Boomers retired last year at the rate of about 8,800 a day, or 3.2 million a year. And one size does not fit 3.2 million people. In fact, it is reasonable to think that every one of those retirees will seek a number that is right for them as they customize their retirement income plan to their specific needs. Further, the number is dependent on market conditions. When Wade Pfau, a financial academic, was asked whether the 4% rule of thumb still applies, he suggested that while it worked historically, it never dealt with the current low interest rates and high stock market valuations at the same time.
Your Starting Income Percentage is Unique to You
No ordinary rule based on averages can replace the factors you need to consider when figuring out how much income your savings can generate. Those factors include:
- Your age, gender and marital status, all of which impact the life expectancy of your plan.
- Market returns, interest and dividend rates, and inflation expectations.
- Your legacy objectives for your kids and grandkids.
- The amount of retirement savings you have accumulated.
- Where your savings are invested: rollover IRA versus personal (after-tax) savings or even equity in your home.
- Your attitude toward taxes, both current and proposed.
To illustrate, the chart below shows the impact of just three variables — age, gender and marital status — on what a viable starting income percentage could be for you using the Income Allocation planning method and typical savings makeup and legacy objectives.
You can see that, unlike the general 4% rule of thumb, a recommended SIP can vary from a high of 5.26% to a low of 4.39%, even before we take other factors into account. Our point is not that it’s higher than the 4% rule, it’s that it’s personalized to the individual. Further, even though it’s more customized, you need to drill down and find out what’s behind the Income Allocation numbers.
What’s Behind the SIP?
Analyzing the SIP and getting the most out of it can make a significant difference in your retirement. For example, if a plan customized for you delivers just 1% more in income per year from your $1 million in savings, that’s $10,000 more to spend in your first year of retirement, or — with 2% annual increase — an additional $337,000 over 25 years.
And it’s not enough to select a plan based on whether the number is higher or lower. What you need is a plan that provides you information as an informed investor:
- What is my projected income, and what are the sources of that income?
- What percentage of my income is safe and not dependent on market returns?
- What are my projected savings, how much liquidity do I have, and what’s the legacy?
- What are the economic assumptions underlying these projections?
Don’t be put off by the technical-sounding nature of these questions. It’s important that you get a report on your plan, review it yourself or review it with an adviser. That review can give you confidence — or not — in your number.
Do want to get your number? Using our Go2Income Guide you can answer a few questions and get your Starting Income Percentage. You can do it on your own and get an instant idea of what an SIP specific to you might be. At the same time you can order a full report with projected income and savings.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Jerry Golden is the founder and CEO of Golden Retirement Advisors Inc. He specializes in helping consumers create retirement plans that provide income that cannot be outlived. Find out more at Go2income.com, where consumers can explore all types of income annuity options, anonymously and at no cost.
-
Five Things to Consider Now If You Want to Retire in 2026
To retire with confidence in the year ahead, tackle these essential tasks right now.
-
What the Government Shutdown Means to Retirees
Depending upon how long it lasts, a government shutdown can impact your daily life, including seeing family, managing your health, and enjoying your free time.
-
Striking Gold (or Gas): A Financial Pro Unpacks the Nuances of Energy Investing
Investing in the energy industry, particularly oil and gas, involves understanding the facts about how projects generate returns through cash flow and long-term asset building, while also being aware of the risks.
-
Escaping the New Golden Handcuffs: A Financial Expert Has a Plan for Today's Executives
Feeling stuck in your job? It could be your complicated compensation package, but it also could be where you live, your family or even how you view yourself.
-
I'm a Financial Planner: Here's How to Invest Like the Wealthy, Even if You Don't Have Millions
Private market investments, once exclusive to the ultra-wealthy and institutions, have become more accessible to individual investors, thanks to regulatory changes and new investment structures.
-
Four Ways a Massive Emergency Fund Can Hurt You More Than It Helps
Saving too much could mean you're missing opportunities to put your money to work. Redirect some of that money toward paying off debt, building retirement funds, fulfilling a dream or investing in higher-growth options.
-
I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard About
Timing is everything, and sequence of returns risk can mean the difference between a retirement nest egg that's overflowing … or empty.
-
Caring for Aging Parents: An Expert Guide to Easing the Financial and Emotional Strain
Early conversations, financial planning and understanding the progression of care needs can help to mitigate stress and protect family relationships.
-
I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term Plan
The new tax bill presents a good opportunity for retirees to revisit tax plans, look into doing some Roth conversions and consider plans for long-term care.
-
I'm an Insurance Expert: This Is Exactly Why Your Insurance Rates Are Soaring (and What You Can Do)
A dramatic rise in the frequency and cost of severe weather and wildfires means you need to prepare, prepare, prepare — no matter where you live — for higher premiums.