The Retirement Withdrawal Rule That Can Quietly Backfire After Age 72

We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. Learn more.

Retirement Retirement Planning Share Share Close Mail Page URL https://money.com/retirement-withdrawal-rule-backfires-after-72/ Link copied!

The Retirement Withdrawal Rule That Can Quietly Backfire After Age 72 By: Marc Guberti Marc Guberti Marc Guberti is a personal finance writer who hosts Breakthrough Success, a podcast where he teaches listeners how to grow their businesses and achieve personal transformations. Has also written: How to Build Retirement Savings at 55 — Even If You’re Behind The Sneaky Social Security Scams Targeting Retirees in 2026 — And the One Rule That Keeps You Safe What Retirees Should Look for When Relocating to a New City How to Build a Retirement Portfolio That Keeps Paying You The Retirement Mistake Many 60-Year-Olds Don’t Realize They’re Making See full bio Published: Mar 5, 2026 4 min read Golden Age Going Digital Getty Images The 4% withdrawal rule is a common framework for people who want to make sure their retirement savings last. The strategy entails withdrawing 4% of your savings during your first year of retirement, then adjusting that figure for inflation in subsequent years. However, this rule can eventually clash with required minimum distributions (RMDs) that the IRS requires people start taking from traditional retirement accounts after they turn 73. Here’s what you need to know. Must ReadExperts are Bullish on Gold — Here's How to Get In3 Ways You Can Make Cash on Your CouchThese Are the Best High-Yield Savings Accounts Right Now The potential tax trap RMDs count as taxable income, and you must take money out equal to a percentage of your nest egg. Your RMD amount is based on your total account balance and an IRS life expectancy factor based on your age. Traditional individual retirement accounts (IRAs) and 401(k)s have RMDs, but Roth accounts don’t. Your RMDs can go up as you age, which may make it challenging to continue withdrawing just 4% throughout your retirement. But also, larger RMDs typically come with a larger tax bill. When determining your withdrawal strategy, tax planning is key. Vet bills can cost thousands — see what pet insurance might cost you Strategize to minimize your RMD taxes One approach to dealing with RMDs and their associated taxes is to start withdrawing from your traditional 401(k) and IRA plans before you turn 73. You can pull from these first instead of Roth accounts, since RMDs don’t apply to Roth accounts. Some people opt for a Roth conversion, which entails moving money from a pre-tax retirement account to a Roth account that is not subject to RMDs. Any withdrawals from a Roth retirement plan are not taxed, and your money can grow for longer. You can also do qualified charitable distributions to give your money to causes you support while reducing your taxes. Still paying for subscriptions you don’t use? See what you could cancel Adapt your withdrawal strategy over time The 4% rule won’t work for everyone, and the right strategy for you may change over time. Morningstar determined that 3.3% was a more safe starting withdrawal rate in 2021 (“assuming a balanced portfolio, fixed real withdrawals over a 30-year retirement, and a 90% probability of success”). The firm raised that to 3.8% in 2022 and 4% in 2023, then brought it down to 3.7%. Their latest estimate is a 3.9% starting withdrawal rate. But Morningstar says there are potential benefits to more flexible strategies too, such as not fully adjusting your withdrawal rate for inflation after annual portfolio loss. "For example, a person following this strategy wouldn’t increase withdrawals after the 2022 bear market, despite the large jump in inflation that occurred at the same time," the Morningstar researchers wrote. Grow your investing confidence with expert-selected stock picks Another potential strategy is to take withdrawals in line with RMDs. "Retirees can use the same framework that underpins RMDs from IRAs," the researchers wrote. "Divide portfolio value by life expectancy to calculate an appropriate withdrawal rate." Must ReadExperts are Bullish on Gold — Here's How to Get In3 Ways You Can Make Cash on Your CouchThese Are the Best High-Yield Savings Accounts Right Now