I Waited Until 75 to Retire With $1.4 Million—Do I Have to Follow the 4% Rule?

Older retirees can often spend more—but need a smart plan.

In retirement, everyone should have a withdrawal strategy that’s more personalized. Dreamstime/TCA

By Maurie Backman From Kiplinger’s Personal Finance

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 to retire. If you enjoy your job and are able to keep at it, you might find that there are benefits to working well into your 70s.

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. 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 might be hoping to make the most of your nest egg. You might be wondering if the popular 4 percent rule (which recommends withdrawing 4 percent 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 percent rule, but that holds true regardless of your retirement age. Rather than feel constrained by the 4 percent rule, you’re better off coming up with a withdrawal strategy that’s more customized to you.

Don’t Just Follow a Broad General Rule

While the 4 percent 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. It might especially be the wrong strategy for you if you’re retiring at 75.

Jim Davis, certified financial planner (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 in 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.

Davis says it’s generally good to use the 4 percent 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 percent rule gives your savings a strong chance of lasting at least 30 years. But if you’re retiring at 75, you might not be looking at that many years of withdrawals. You might 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 percent 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 percent to 7 percent range.”

As Sweeney points out, “That’s an immediate $70,000 to $98,000 per year, compared to the $56,000 the 4 percent 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 percent rule are often quick to point out that it lacks flexibility. Ultimately, Davis says, the best course of action is to use 4 percent as a reference point but make adjustments as necessary.

“By age 75, the real question isn’t, ‘Do I have to follow the 4 percent 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.”

The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.