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How much should you really be spending in retirement? For years, the “4% Rule” has been the gold standard. However, a 2025 study by research fellows David Blanchett and Michael Finke, “Retirees Spend Lifetime Income, Not Savings,” reveals that actual withdrawal rates are significantly lower than traditional models suggest.
The transition from the “accumulation phase” of the working years to the “decumulation phase” of retirement is often cited as the most complex challenge in retirement. While traditional financial planning focuses on “safe withdrawal rates,” the research by Blanchett and Finke reveals a significant disconnect between what retirees can spend and what they actually spend. The study highlights a psychological “barrier” to spending from investment portfolios versus spending from guaranteed income.
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Actual withdrawal rates of retirees
We often read about the popular retirement spending models, including: the guardrails method, strategic withdrawals to minimize sequence of return risk and of course the 4% Rule. But in reality, most retirees fall short of even the most conservative approaches.
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The average 65-year-old couple (based on households with $100,000+ in investable assets) actually withdraws only about 2.1% of their savings annually. Singles are even more conservative at 1.9%. These figures represent actual withdrawal rates for 65-year-old retirees, based on the authors’ analysis of the Health and Retirement Study (HRS), a long-term survey of U.S. retirees.
Here is the breakdown of withdrawal rates by age and marital status:
|
Age- |
Typical withdrawal rate- single |
Typical withdrawal rate- married |
|
65 |
1.9% |
2.1% |
|
75 |
4.4% |
3.2% |
|
80 |
4.6% |
3.8% |
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How martial status impacts withdrawal rates
At age 65, single people spend even less (1.9%) than married couples (2.1%). Single retirees in the 65-year-old bracket often exhibit even more extreme “longevity fear” — the fear of being alone with no assets late in life — which leads to an even more conservative initial withdrawal rate.
However, married couples often have higher combined expenses and may feel a slightly higher “need” to pull from savings to maintain a joint household. Couples also typically hold back on spending more than singles to protect the surviving spouse.
A 2.1% withdrawal rate means that for every $100,000 in savings, a married couple is only taking out $2,100 per year. These numbers show that retirees are spending roughly half of what professional financial models consider “safe.” For a 65-year-old couple, the common “4% Rule” would suggest a withdrawal of $4,000, but they are only taking $2,100.
The 1.9% and 2.1% withdrawal rates signify that at age 65, retirees are essentially treating their savings as an “emergency fund” or a “bequest” for heirs rather than a source of lifestyle income. They are largely living off their Social Security and pension checks while letting their portfolios sit mostly untouched.
A central finding of the research is that the source of the funds dictates the likelihood of it being spent. Retirees categorize wealth into different psychological “buckets,” leading to vastly different consumption rates. Retiree withdrawal rates at 65 appear to be far more conservative than those of retirees at 75 or 80. However, it’s not that retirees get more comfortable spending their investments as they get older. Rather, it’s that retirees are forced to increase their income through Required Minimum Distributions (RMDs).
Lifetime income is a “license to spend”
The researchers found that for every $1 of assets converted into guaranteed income (such as an annuity), retirees were willing to spend roughly twice as much as they would from a standard investment portfolio. For example, a 65-year-old couple with $60,000 in guaranteed income is nearly twice as likely to “splurge” as a couple with only $20,000 in guaranteed income, even if both couples’ total net worth is identical.
The “Lifetime income” effect: Retirees are willing to spend roughly 80% of their “lifetime income,” which includes Social Security, pensions, and annuities. But they are only willing to spend about half of what they could safely afford to from their investment assets, which include: managed portfolios, IRAs and brokerage accounts. Retirees spend only about 40% to 50% of what would be considered a “safe” withdrawal from these pools of resources.
Households with higher guaranteed income are more comfortable withdrawing from their investment assets than those with lower guaranteed floors. Essentially, the “splurge” only feels safe when the essentials are covered by a guaranteed stream of income.
The “RMD effect” (Ages 73-75+): Withdrawal rates typically increase sharply once Required Minimum Distributions (RMDs) kick in. The study found that retirees tend to view RMDs as “income” rather than “savings depletion.” When the government forces a withdrawal, retirees are much more likely to spend that money than reinvest it.
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Don’t let fear curtail your spending or enjoyment
The “Golden Years” are meant to be a time of peak utility — where health and time finally align with wealth. However, the lack of a “pension-like” structure providing guaranteed income often leaves retirees paralyzed by uncertainty.
By the time many reach age 80 and realize they have plenty of money left, their physical ability to travel or enjoy discretionary spending has often declined. The real risk in retirement may not be outliving your money, but outliving your ability to spend it on the things that matter most.
