A lot of people reach retirement age without much money in savings. But if you worked hard and saved diligently, you may be in a very different position. And if you’re retiring with a respectable nest egg, knowing how to manage it could matter just as much as how long it took to build.
Many financial experts recommend a strategy called the 4% rule. The rule calls for withdrawing 4% of your savings balance in your first year of retirement, then adjusting each subsequent withdrawal for inflation. Financial planner Bill Bengen developed the rule in 1994, basing it on historical market returns from a balanced portfolio of roughly 50% stocks and 50% bonds.
Followed faithfully, the strategy is designed to give your savings a high probability of lasting 30 years. But while many financial insiders remain fans of the 4% rule, Suze Orman is not.
Orman thinks the 4% rule no longer serves today’s retirees well, and she recommends a different approach to managing withdrawals.
Why Orman thinks the 4% rule is a problem
The 4% rule rests on assumptions that may no longer hold. It was calibrated to a specific interest-rate environment and a particular mix of assets. Orman argues that markets are unpredictable, interest rates have shifted considerably since Bengen’s original research, and Americans are simply living longer than they were in 1994. That combination, in her view, makes the 4% rule genuinely risky for people who could spend 30 or 40 years in retirement.
Orman therefore recommends starting with a 3% withdrawal rate, or even less, depending on how the portfolio is invested. For a retiree with $1 million in savings, that means taking $30,000 a year instead of $40,000. Bridging that $10,000 gap requires deliberate planning, but several modern strategies make it manageable. Notably, Morningstar’s 2025 State of Retirement Income research now pegs the safe starting withdrawal rate at 3.9% for a 30-year horizon, up slightly from 3.7% the prior year, suggesting the debate is live and evolving.
Modern strategies to cope with smaller withdrawals
Running out of money is one of the most common fears retirees express. Fortunately, a lower withdrawal rate does not have to mean a lower quality of life. Several legislative and planning tools can help fill the gap.
Utilize SECURE 2.0 “Super Catch-Ups”
Orman recommends working longer to keep your nest egg growing. Under current tax law, those extra years are more rewarding than ever. SECURE Act 2.0 allows workers who turn ages 60, 61, 62, or 63 during the calendar year to make super catch-up contributions to their employer-sponsored retirement plans. For both 2025 and 2026, that enhanced limit is $11,250, compared with the standard $7,500 catch-up available to workers aged 50 and older. Directing those additional dollars into a tax-advantaged account in the final working years can meaningfully increase the nest egg you carry into retirement.
Implement Dynamic Guardrails
Rather than locking into a rigid 3% or 4% rate from day one, many planners now favor a “dynamic guardrails” approach. The idea is straightforward: you can increase withdrawals when your portfolio is performing well, but you commit in advance to pulling back if the balance dips below a predetermined floor. That built-in flexibility often supports a higher starting withdrawal than the strict 3% Orman recommends, while still protecting against the sequence-of-returns risk that can devastate a retirement portfolio in a bad market stretch.
Beware the IRMAA Surcharge
One of the most underappreciated threats to retirement income is the Income-Related Monthly Adjustment Amount (IRMAA). Medicare uses your Modified Adjusted Gross Income from two years prior to determine whether you owe a surcharge on top of your standard Part B and Part D premiums. In 2026, the standard Part B premium is $202.90 per month, but IRMAA kicks in once MAGI exceeds $109,000 for single filers or $218,000 for married couples filing jointly. Because IRMAA operates like a cliff (crossing a threshold by even one dollar triggers the full surcharge for that tier), coordinating withdrawal amounts with these brackets can preserve thousands of dollars each year.
Income Layering and Synthetic Dividends
A growing number of retirees are turning to “income layering” to reduce their dependence on portfolio withdrawals. This approach combines Social Security, bond ladders, and options-based income strategies, sometimes called synthetic dividends, to build a reliable cash-flow floor. Techniques such as writing covered calls on existing stock holdings can generate income without forcing a sale of shares, which is especially valuable during market downturns when selling at depressed prices would lock in losses.
Maximizing Social Security
Orman is a firm advocate of delaying Social Security until age 70. For workers whose full retirement age is 67, waiting until 70 permanently increases their monthly benefit by 24%, an 8% boost for each of the three additional years. That guaranteed, inflation-adjusted income acts as a counterweight to a lower portfolio withdrawal rate and reduces the risk that the portfolio runs dry in the later decades of retirement.
Talking with a financial advisor about your specific circumstances is always worthwhile. A good advisor can assess your portfolio mix, project your income needs, and design a tiered income plan that balances cash flow with long-term principal preservation.
Editor’s note: This article was updated to include the specific $11,250 super catch-up contribution limit for workers ages 60 to 63 in 2025 and 2026, the 2026 IRMAA income thresholds ($109,000 for single filers, $218,000 for joint filers) and the current standard Part B premium of $202.90 per month, and Morningstar’s latest 3.9% safe withdrawal rate recommendation from its 2025 State of Retirement Income research.
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