Morningstar’s 2026 Retirement Withdrawal Advice: Will It Work for Investors?
Morningstar’s 2026 guidance is out, recommending a lower withdrawal rate than the traditional 4%-a-year strategy. Researchers compared the two approaches to see how they stack up.
Ellen B. Kennedy
Morningstar, a financial services firm and a trusted name in retirement planning, offers guidance that differs from the famous 4% withdrawal rule. We looked at research on that strategy to see how it panned out. We also reviewed this year's recommended rate.
The firm publishes an annual report, "The State of Retirement Income," which includes its own strategy for a safe withdrawal rate.
The report, which began in 2021, has a history of challenging conventional wisdom, including the 4% rule devised by financial adviser William Bengen in 1994. That rule holds that retirees can begin with a withdrawal rate of 4% of their balance and adjust for inflation each year to have a good chance of their money lasting through retirement.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
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.
Unlike Bengen's research, which reviewed data back to 1926, Morningstar's research is forward-looking. In recent years, it has led new retirees to be advised to withdraw less than 4% to reduce their risk. This included research published in 2021 that recommended a 3.3% safe withdrawal rate (for 2022), and in December 2025, when 3.9% was announced as the optimal rate for those retiring in 2026.
For retirees who are uncertain about how much they can withdraw from their portfolios, this Morningstar guidance — which takes future events into account — could be an invaluable guidepost if proven to work.
That's why it's so exciting to see that Morningstar recently put its research to the test, aiming to determine whether its past advice has panned out.
Has the financial services firm given retirees good advice, or did analysts steer retirees wrong by suggesting a more conservative withdrawal amount?
For the Year | Withdrawal Rate |
|---|---|
2026 | 3.90% |
2025 | 3.70% |
2024 | 4.00% |
2023 | 3.80% |
2022 | 3.30% |
Source: Morningstar, 2025.
Did Morningstar steer retirees wrong?
To put Morningstar to the test, researchers looked at whether the recommendation to stick to a 3.3% withdrawal rate in 2021 had panned out. They tested a hypothetical retiree's $1 million portfolio performance, with the test portfolio presumed to be invested in an appropriate mix of U.S and international stocks, bonds and cash. The study ran Monte Carlo (portfolio stress-test) simulations over a 30-year period.
The research revealed that the more conservative (3.3%) approach would have paid off for those who retired at the start of 2022, as double-digit losses and inflation that year led to major declines in portfolio value. Specifically:
Retirees who followed the 4% rule would have seen their portfolio balance decline to $773,000 after withdrawals made at the start of 2023 and rebound to $934,000 by 2024. If they continued to follow the 4% rule and adjusted withdrawals for inflation, they'd be withdrawing $45,000 per year in 2025, or 4.85% of their balance.
Retirees who followed the 3.3% recommendation would have seen their portfolio balance dip to $786,000 after 2023 withdrawals and bounce back to $960,000 by 2024. Their 2025 inflation-adjusted withdrawal rate would be 3.89%, giving them $37,357 to spend.
While retirees in the first group who followed the 4% rule would have more to spend now, Monte Carlo simulations predict just a 72.30% success rate over 30 years for this group, compared with a 91.80% chance of their money lasting for the group that followed Morningstar's guidance.
Should you follow Morninstar's advice for your withdrawal rate?
Every retiree would prefer a 92% chance of their money lasting to a 72% chance. There's a solid argument to be made that Morningstar was 100% right, and retirees should have listened to the analyst's suggestions and chosen the more conservative rate years ago.
Of course, there are many factors that go into choosing a safe withdrawal rate — including your goals for retirement.
The first group that followed the 4% rule has had more money to spend during a turbulent period, and some retirees would accept that as a tradeoff for having a lower chance of future retirement success.
The 2022 to 2025 period was also a time of exceptionally high inflation, so if the increase in their withdrawal amount slows over time, retirees in the 4% group might not fare so badly in the end.
Retirees also need to follow required minimum distribution (RMD) rules, which might conflict with both the 4% rule and with Morningstar's guidance. As a result, seniors may be more limited in how much they withdraw from traditional retirement accounts.
In addition, remember that your portfolio may not match the test portfolio's conservative construction. The test portfolio included "a 40% weighting in US stocks, 10% in international stocks, 32% in US core bonds, 8% in global core bonds, and 10% in cash, rebalanced annually."
If you plan to retire in 2026, should you follow Morningstar's latest recommendation to set a 3.9% withdrawal rate?
Ultimately, the best approach is to create a personalized retirement withdrawal plan based on account balances, investment risk, health status and household budget to achieve the best retirement possible now and in the future.
Retirees can get help from a financial adviser if they aren't sure how to do that, and making that investment in professional advice might be worth it rather than simply following a number chosen by analysts online — even if the evidence does suggest their initial advice was rock solid.
Read More
-
'Donroe Doctrine' Pumps Dow 594 Points: Stock Market TodayThe S&P 500 rallied but failed to turn the "Santa Claus Rally" indicator positive for 2026.
-
The Wealth Equation: Balancing Money and StressSponsored Don’t let assets be a liability that strains your family.
-
Is Your Emergency Fund Running Low? Here's How to Bulk It UpIf you're struggling right now, you're not alone. Here's how you can identify financial issues, implement a budget and prioritize rebuilding your emergency fund.
-
An Expert Guide to How All-Assets Planning Offers a Better RetirementAn "all-asset" strategy would integrate housing wealth and annuities with traditional investments to generate more income and liquid savings for retirees.
-
Forget FIRE: Why ‘FILE’ Is the Smarter Move for Child-Free DINKsHow shifting from "Retiring Early" to "Living Early" allows child-free adults to enjoy their wealth while they’re still young enough to use it.
-
7 Tax Blunders to Avoid in Your First Year of Retirement, From a Seasoned Financial PlannerA business-as-usual approach to taxes in the first year of retirement can lead to silly trip-ups that erode your nest egg. Here are seven common goofs to avoid.
-
How to Plan for Social Security in 2026's Changing Landscape, From a Financial ProfessionalNot understanding how the upcoming changes in 2026 might affect you could put your financial security in retirement at risk. This is what you need to know.
-
Healthy to 100: Secrets from Countries Where Retirees Age BestLongevity is a team sport, according to author Ken Stern. Here's the secret sauce for living long, healthy lives from countries such as Italy and Japan.
-
6 Overlooked Areas That Can Make or Break Your Retirement, From a Retirement AdviserIf you're heading into retirement with scattered and uncertain plans, distilling them into these six areas can ensure you thrive in later life.
-
I'm a Wealth Adviser: These Are the 7 Risks Your Retirement Plan Should AddressYour retirement needs to be able to withstand several major threats, including inflation, longevity, long-term care costs, market swings and more.
-
High-Net-Worth Retirees: Don't Overlook These Benefits of Social SecurityWealthy retirees often overlook Social Security. But timed properly, it can drive tax efficiency, keep Medicare costs in check and strengthen your legacy.
