Flexible Strategies Can Surge Starting Safe Retirement Withdrawals
Adaptable approaches in retirement could boost starting withdrawal rates past normal figures, according to findings from Morningstar.
Morningstar’s 2025 “State of Retirement Income” research recommends a starting safe withdrawal rate of 3.9% for those looking for a steady level of inflation-adjusted spending each year, up from 3.7% last year. However, the research notes that with flexible strategies, like delaying Social Security, implementing a “guardrails” approach, and including Treasury Inflation-Protected Securities (TIPS) as part of a retirement spending plan, participants could increase their rates to 5.7%.
“We tested four additional flexible spending methods this year, two of which lifted the starting safe withdrawal rate to 5.7%. However, the right level of flexibility in a retiree’s spending system will depend on the individual’s tolerance for spending changes, including the extent to which fixed expenses are covered by nonportfolio income sources,” stated Morningstar’s researchers Amy C. Arnott, Christine Benz, Jason Kephart, and Tao Guo, in the findings.
With the guardrails approach, retirees would base their withdrawal rates on market performance. Morningstar’s specific strategy includes a starting safe withdrawal rate of 5.2% for a portfolio of 40% equity and 60% bonds. While this can be a volatile tactic due to intense market fluctuations, “the addition of Social Security income adds valuable stability,” writes Morningstar.
Other approaches, like incorporating TIPS in a retirement spending plan, could help drive higher withdrawal rates, the research finds. As of Sept. 30, 2025, a 30-year TIPS ladder can support an inflation-adjusted starting withdrawal rate of 4.5%. Still, because TIPS are self-liquidating, any money for heirs would have to come from other assets, Morningstar acknowledges in its research.
Lastly, allocating savings to an immediate or deferred annuity could help increase in-retirement cash flows, but this also comes with its set of cautions. “As with spending higher amounts from a portfolio to enable delayed Social Security filing, the allocation to the annuity early in retirement reduces the money in the portfolio that can compound over the retiree’s drawdown period,” Morningstar writes.
Additional findings from Morningstar’s “State of Retirement Income” report can be found here.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
