What’s the Best Strategy for Withdrawing From My Retirement?

Summary

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Episode Overview

Podcast: Ramsey Everyday Millionaires
Episode: What’s the Best Strategy for Withdrawing From My Retirement?
Date: May 15, 2026
Hosts: Dave Ramsey & Ken Coleman (Ramsey Network)
Theme:
This episode tackles a fundamental retirement question: What is the best, most sustainable strategy for withdrawing funds from a 401(k) or retirement nest egg? With listener Isaac from Nevada nearing retirement, Dave Ramsey and Ken Coleman provide accessible, no-nonsense advice on withdrawal rates, the impact of inflation, the risks of overspending, and the psychological shift from saving to spending in retirement.

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Key Discussed Topics & Insights

1. Assessing Withdrawal Rates

(00:33–04:51)

• Contextualizing Market Returns & Inflation:

  • The stock market has historically averaged around 11.8-12% annual returns.
  • Inflation averages 4.2% over 40–50 years—sometimes higher or lower (“was above that during President Biden’s tenure, due not to President Biden, but due to inflation” — Dave Ramsey, 00:21).

• Calculating Sustainable Withdrawals:

  • Use your average market returns and expected inflation to guide withdrawal rates.
  • If your fund averages 12% annual return and inflation is 4%, you could withdraw up to 8% (12% - 4%) per year without eroding your nest egg’s real value.
  • Pulling off only the “income” lets your principal maintain purchasing power against inflation.

• Avoiding Overspending Pitfalls:

  • Withdrawing more than you earn depletes your principal and jeopardizes future income.
  • Example: “If you're making $120,000 on your million this year and you pull out $150,000, eventually that's going to run into a wall if you live long enough, right?” — Dave Ramsey, 03:35.

2. Working With an Advisor

(00:33, 05:00)

• Personalization:

  • Financial planning should be individualized; work with a financial advisor or SmartVestor Pro to crunch your specific numbers.
  • Consider “how much you want to leave behind” and your own comfort with variability.

• Required Minimum Distributions (RMDs):

  • At age 72.5, RMDs are mandatory for traditional 401(k)s. (05:00)
  • Suggested method often results in a higher withdrawal than the minimum.

3. Conservative vs. Aggressive Withdrawals

(03:50–05:40, 06:17-07:30)

• Withdrawal Range Guidance:

  • General financial advice recommends 6% withdrawal rates; Dave is comfortable with 8%, reflecting faith in long-term market averages and conservative spenders.
  • The withdrawal rate may be higher when retirees have significant nest eggs or other assets.

• Risk Perspective:

  • “Very few people outlive their money once they’ve built a sizable nest egg.” — Dave Ramsey, 03:59.

• Adjust for Market Variability:

  • Some years might deliver larger market gains (26% or 24% in recent years).
  • Good years can give a “pad” to weather downturns.

4. Psychology of Spending in Retirement

(06:45–07:45)

• Transition from Saver to Spender:

  • Many longtime savers need “permission” to enjoy spending in retirement.
  • “It’s harder to get people to actually spend that have been savers.” — Dave Ramsey, 06:57.

• Ramsey Philosophy:

  • Live below your means and sacrifice now so you can “live and give like no one else” later.
  • “We want to teach you to live and give like no one else and be in a position that if someone you love is in trouble, you can just help them. Got the money? Shut up. It's not a big deal.” — Dave Ramsey, 07:20.

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Notable Quotes & Memorable Moments

• On Balancing Withdrawals & Inflation:
  • “If you pull off eight or less, your money is growing still more than or equal to inflation, and it would run forever if that math is correct.” — Dave Ramsey (02:28)
• On Outliving Your Money:
  • “What you don't want to do is draw out so much that you end up running out of money before your life is over. Hello.” — Dave Ramsey (03:14)
• On the Uncertainty of Knowing When You’ll Die:
  • “It always helps too to know exactly when you're going to die. Then you can run the math.” — Dave Ramsey (04:44)
  • “There'll be an app for that soon. I'm certain of it.” — Ken Coleman (04:54)
• On Critics and the Financial Advice Community:
  • “You'll also find... a lot of financial nerds... that actually hate the advice I just gave you.” — Dave Ramsey (05:00)
  • “Can we mess with the critics just real quick, just for fun?” — Ken Coleman (05:29)
• On Experiencing Retirement Wealth:
  • “We find people that have been living on 60,000 bucks. When I talk to them about pulling 80 out, they think they're in heaven.” — Dave Ramsey (07:35)

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Timestamps for Important Segments

• 00:33–03:45: Calculating safe withdrawal rates—balancing market returns and inflation.
• 03:45–04:44: Risk of overspending, running out of money, and adjusting for longevity.
• 05:00–05:40: Debating with industry critics and philosophical approach to “dying broke.”
• 06:17–07:42: The psychology of spending vs. saving, and giving “permission” to enjoy hard-earned retirement assets.

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Summary Table: Practical Guidelines

| Topic | Dave’s Key Point | Quote & Timestamp | |-----------------------|-------------------------------------------------------------------------------------------|-----------------------------------| | Market Return | Use 12% historical average | “The stock market has averaged 12%...” (00:41) | | Inflation | Assume 4% average in planning | “Inflation has averaged... 4.2%.” (00:48) | | Sustainable Rate | Withdraw up to 8% (12% returns – 4% inflation) | “If you pull off eight or less...” (02:28) | | Overspending Danger | Don’t outdraw earnings; avoid depleting principal | “If you pull out more than you earn...” (03:14) | | Tax Impact | Taxes owed on traditional 401(k) withdrawals | “That's $80,000 worth of income. And so minus taxes...” (05:16) | | RMDs | Required at 72.5; usually lower than suggested rate | “You have mandatory withdrawals called required minimum distributions...” (05:00) | | Psychology | Biggest hurdle for many: spending after years of saving | “It’s harder to get people to actually spend...” (06:57) |

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Takeaways for Listeners

• Assess your portfolio’s historic returns and factor in average inflation for withdrawal planning.
• Aim to withdraw less than or equal to your net returns after inflation for long-term sustainability (typically about 6–8%).
• Seek professional advice to tailor withdrawal strategies to your goals, tax situation, and legacy preferences.
• Don’t be afraid to enjoy your money in retirement—it’s what you’ve worked for.
• Be aware of required minimum distributions and tax implications.

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Final Thought

Dave Ramsey and Ken Coleman blend mathematical guidance with relatable real-world advice in this episode. Their approach encourages prudence without fear, and permission to enjoy—and share—the fruits of disciplined investing.

Transcript

[A]

Foreign.

[B]

This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Today's question comes from Isaac in Nevada. I'm two years out from retiring. I'd like to know the best strategy on how to start withdrawing funds from my 401k. Do I change the dividends to not reinvest? Is there a certain percentage that's safe to withdraw every month or year? And if so, how often should I withdraw?

[A]

Hmm. Okay. Well, what I would do is sit down with your financial planner, your SmartVestor Pro, if you have one, or your advisor, and help them have them crunch some numbers with you. The stock market has averaged 12%, 11.8% since it began. Okay. Inflation has averaged for the last 40 years, 50 years, somewhere around 4.2%. Below that right now was above that during President Biden's tenure, due not to President Biden, but due to inflation. I'll just make a comment and keep rolling. Protect him just a little bit there. He got blamed for something. Wasn't his anyway. But inflation comes and goes, in other words, and so do returns. Last year, you would have made over 20% on your money. The year before, you would have made over 20% on your money. The year before that, you wouldn't have made that. So just go back and look at some of the track record on the market. Now, if your funds are invested, figure out what they're averaging, have been averaging over the last many years and what you think they're going to average. But let's just use some easy numbers. Let's pretend that your funds are like mine and they're averaging around 12. Again, I made 26 last year, but they're averaging around 12. Okay? And inflation's 4. So if I draw out 12, the value of my nest egg starts to go away at the rate of inflation. The math is all still sitting there. If I only pull off the income and I let the nest egg sit there, that's fine. But a million dollars, 10 years from now, because of 4% inflation, it won't buy as much as it buys today. So it begins to erode your purchasing power. If you take out the full amount that you're earning, okay, if you took out 8% and left 4 in and it made 12, 12 minus 4 is 8. You would leave enough in to cover inflation and you'd be pulling off enough so your million dollars would grow by 40,000, but the purchasing power would lose by 40,000. So you would break even on what it would buy because it'll take a million 40,000 next year to buy what a million would buy this year. If inflation's 4%. That makes sense. Good. Okay, so if you pull off eight or less, your money is growing still more than or equal to inflation, and it would run forever if you're, if that math is correct. Okay. Now that's assuming you're earning 12 and inflation is truly for average over years. So if you had a million dollars and you pulled off $80,000 a year, you'd be just fine. And you know, you could do that monthly, you can do it quarterly, but you can say, I want to pull out an average of X percent of this nest egg. You can set it up at 60,000, I don't care. And leave a little more in there if that makes you nervous. You know, what you don't want to do is draw out so much that you end up running out of money before your life is over. Hello. And so if you're making, if you're making 120,000 on your million this year and you pull out 150,000, eventually that's going to run into a wall if you live long enough, right? Because you're pulling out more than you're making. And so next year you're going to make even less because you don't have as much in there. You're killing the goose that's got, that's got the golden eggs coming out. So pull out less than the average that you project to earn by at least the rate of inflation. So what's your projection to earn and what do you think inflation is going to be? Sit down with your advisor. A lot of people in the financial world say 6%. I'm comfortable with 8. Because very few people live, outlive their money once they built a sizable nest egg. Now if you're starting with 200 grand, it's different than if you're starting with 2 million too. Changes the formula. Because if you whittle away at your 2 million and it gets down to only a million 5 before you die. Oh, well, you didn't kill anything, right? No big deal. But if you, if you're 2 million grows to 3 million before you die and you live out of it, well, you leave a better inheritance is all. So you kind of got to, you know, how much do you want to leave behind? Engage that. It always helps too to know exactly when you're going to die. Then you can run the map.

[B]

That's true.

[A]

That's helpful.

[B]

There'll be an app for that soon. I'm certain of it.

[A]

But that's how this works. So you will also find, my dear Isaac, that there's a lot of financial nerds out there that are complete freaks about this stuff, that actually hate the advice I just gave you.

[B]

This is true.

[A]

They are very vocal about how stupid I am. And how many people are going to die broke because of Dave Ramsey. I don't want you to die broke. I want you to get broke right before you die because you've enjoyed the money, gave the money, done with the money, what you wanted to do with it, whether it's an inheritance or something else.

[B]

Can we mess with the critics just real quick, just for fun?

[A]

Why not?

[B]

What are we talking, Dave, 48 hours? 72 hours broke right before you die?

[A]

Because you know they're gonna come after

[B]

you for saying that.

[A]

You gotta dial it in. You gotta dial in. You gotta really know. But here's the thing, too. What ends up happening is that this stuff is not static. See, like, last year was 26%. The year before was 24%. And so if you're pulling off eight, you've got huge gains. You got a million dollars. You made $250,000, and you pulled off 80. Now backtrack that math, and that gives you a lot of pad for some years that have some down years, and they don't quite earn 8. So most people, once they get to a million dollars worth of retirement savings and a lot of people have, in addition to other assets, then they're able to navigate their way through the next many years. So let's say this person is, by the way, 72 and a half. You have mandatory withdrawals called required minimum distributions. What I'm giving you will beat that, so you don't have to worry about it. And, oh, by the way, too, you got to pay taxes on this. If It's a traditional 401k and not a Roth 401. So taxes come out of that 80 grand. That's $80,000 worth of income. And so minus taxes, that's what you got to live on on that example. So that's the way you come back into it. And then play with the numbers back and forth. If you want to be a little bit more conservative, fine. If you want to spend a little more, that's fine, too. Most of the time. I find, though, Ken, it's harder to get people to actually spend that have been savers. Oh, yeah, yeah. We get a lot of calls here asking for permission to enjoy the money that they built up over the last 30 years. A lot of those calls. We want to give you permission. We want to teach you to live like no one else. Sacrifice so that later you can live and give like no one else and be in a position that if someone you love is in trouble, you can just help them. Got the money? Shut up. It's not a big deal. And so a lot of times, here's the thing. We find people that have been living on 60,000 bucks. When I talk to them about pulling 80 out, they think they're in heaven.

[B]

That's true.

[A]

You know, and so that. That's more what we run into than some financial nerd on TikTok. Who's decided? Dave Ramsey's good. Clickbait.