Research suggests retirees can withdraw more than the 4% rule—here's why

For decades, retirement planning has operated on a simple assumption: your spending will rise every year, right alongside inflation. A retiree who spends $50,000 in year one should plan to spend roughly $51,500 in year two, then $53,045 in year three, and so on, compounding at roughly 3% annually. This logic appears everywhere—in retirement calculators, in financial advisor spreadsheets, in the foundational research behind the famous 4% withdrawal rule. But the data tells a different story.

David Blanchett, head of retirement research at Prudential Financial and a portfolio manager at PGIM, has spent over a decade studying how retirees actually spend money as they move through retirement. His findings challenge the inflation-adjustment orthodoxy. Most retirees, he has found, do not increase their spending by the full amount of inflation each year. If inflation runs at 3%, a typical retiree might increase spending by only 1% annually—a gap that compounds significantly over time. Even more striking: when Blanchett examined retirees with substantial wealth, those who could easily afford to spend more, they also voluntarily reduced spending as they aged. This suggests the pattern reflects choice, not constraint.

Why would someone with plenty of money spend less as they grow older? Blanchett points to a model many in the field recognize: the Go-Go, Slow-Go, No-Go phases of retirement. In the early years, retirees travel, pursue hobbies, stay active. As they age, they naturally slow down. Some of this slowdown stems from health limitations, but much of it appears to be simply how people are. The desire to do less, to spend less, arrives with time. When Blanchett looked across different cohorts and examined the data through multiple lenses—accounting for debt payoff, spousal death, and other life changes—the pattern held: spending declined, not because people had to cut back, but because they wanted to.

This observation has profound implications for how much money someone actually needs to retire. If the standard models assume spending rises with inflation but real retirees spend less, then those models are overestimating retirement income needs. Blanchett's research suggests that initial safe withdrawal rates could climb from the traditional 4% to somewhere between 5% and 5.5%—a meaningful increase that could allow people to retire sooner or with smaller nest eggs. But there is a catch: this higher withdrawal rate assumes retirees are willing to be flexible, to cut back on discretionary spending if markets turn sour or life becomes expensive.

Healthcare remains the wildcard. For most retirees, out-of-pocket medical costs are manageable—Medicare premiums, routine care, the expected expenses of aging. But for a minority—somewhere between 5% and 20% of retirees—late-life care becomes catastrophic. Long-term care in your 80s or 90s can drain a portfolio with stunning speed. This risk is genuinely hard to plan for, and Blanchett does not minimize it. Yet the fact remains that most retirees will not face such expenses, and planning as if they will may cause people to save far more than necessary.

Blanchett's solution involves a clearer conversation between retirees and their advisors. The first step is awareness: understanding that real-world spending patterns diverge from the inflation-adjustment model. The second is categorization: distinguishing between essential expenses—healthcare, housing, food—and discretionary ones like travel and entertainment. If essential expenses are covered by guaranteed lifetime income, such as Social Security or a pension, then a retiree can draw a higher percentage from their portfolio and adjust the discretionary portion downward if needed. This approach acknowledges both the data and human nature. It allows people to spend more when they are young and healthy enough to enjoy it, knowing they can trim back later if circumstances demand it.

When Blanchett steps back and looks at the broader picture, he sees something that contradicts the "retirement crisis" narrative. Yes, about 35% of people enter retirement without robust savings. Yet when researchers measure retirement satisfaction—both objective measures like financial security and subjective ones like happiness—retirees consistently report higher well-being than they expected. People figure it out. They adjust. They find ways to make retirement work. The models that assume spending rises with inflation, Blanchett argues, may actually be making retirement look worse than it is. By accounting for how people really spend, by building in flexibility, the picture brightens. Retirement becomes not a crisis to fear but a phase of life that, with honest planning and willingness to adapt, most people navigate successfully.