Is 4% Your Optimal Retirement Portfolio Withdrawal Rate?

By Daniel Baumgartner & Petra Peters

Retirement marks the end of the accumulation phase and the beginning of the distribution journey—one that requires just as much care, strategy, and preparation. A common question many people ask at this stage is: How much can I safely withdraw from my retirement portfolio each year?

Enter the 4% Rule, a widely referenced guideline designed to help retirees avoid outliving their savings. While it’s a helpful starting point, applying the rule is more nuanced when cross-border considerations and currency fluctuations come into play. For globally mobile investors or couples with international ties, understanding how to optimize your retirement portfolio withdrawal rate requires more than a one-size-fits-all approach.

What Is the 4% Rule?

The 4% Rule was introduced in the 1990s by financial planner William Bengen. Based on historical market data, the idea was simple: retirees could withdraw 4% of their investment portfolio in the first year of retirement and adjust that amount each subsequent year for inflation. Following this approach, Bengen suggested, your portfolio could potentially last 30 years or more.

This principle offers a useful baseline for establishing a withdrawal strategy, especially in the early planning stages. But like any rule of thumb, it’s not without limitations, especially for internationally mobile individuals whose financial lives don’t neatly fit within the borders of a single country.

Beyond the Rule: Consider Your Unique Circumstances

For U.S. citizens living abroad, Europeans investing in the U.S., or internationally blended couples, several factors can impact the reliability of a traditional 4% approach:

Currency risk: If your retirement spending is in euros but your assets are primarily in U.S. dollars (or vice versa), fluctuations in exchange rates can dramatically alter your effective withdrawal rate and purchasing power. The 4% Rule doesn’t account for these variables.
Portfolio structure: Many global investors use diversified portfolios that include a mix of U.S. and international assets. Asset allocation, risk tolerance, and the need for liquidity all influence the optimal withdrawal strategy.
Longevity expectations: People are living longer, healthier lives, especially in Europe. Depending on your health and lifestyle, planning for 30+ years of retirement may be wise.

While the 4% Rule may be a reasonable anchor, it should be viewed as a starting point, not a final answer. A more refined withdrawal strategy should reflect your personal goals, your household’s geographic footprint, and your actual cost of living, today and in the future.

Ask yourself:

Are my assets aligned with where I plan to spend retirement?
Have I accounted for inflation (both local and foreign)?
Am I withdrawing from the most tax-efficient accounts first?
How exposed am I to currency and geopolitical risk?

An optimized retirement portfolio withdrawal rate takes all of this into account.

Flexibility Is Key

One of the best ways to manage retirement income in an uncertain world is to stay flexible. Instead of rigidly following a fixed percentage, many retirees today adopt a dynamic withdrawal strategy: one that adjusts based on market performance, life events, or changes in income needs.

This is especially useful for individuals whose financial lives span more than one country. For example, if markets underperform or exchange rates shift unfavorably, it might be wise to reduce withdrawals temporarily. Conversely, in a strong market year, you may choose to take more, within reason.

Consult With an Investment Advisor

Whether you’re planning retirement in Europe, living in the U.S., or part of a cross-border household, applying the 4% Rule without flexibility might overlook critical nuances. While it’s a helpful benchmark, it’s most effective when paired with tailored strategies that reflect your personal and international financial landscape.

If you’re reevaluating how much income your retirement portfolio can realistically generate and how global factors might affect your retirement portfolio withdrawal rate, now could be the right time to revisit your approach.

At Terra Nova Asset Management our team of investment advisors can help you design a personalized investment plan to help you reassess and pursue your goals. Reach out to us directly at 212-355-1234 or ppeters@terranovausa.com for the New York office (Petra) or 855-248-6630 or baumgartner@terranovausa.com for the New Jersey office (Daniel).

You may also contact us here to schedule a meeting and we’ll get in touch with you soon!

About Daniel

Daniel Baumgartner is a founding partner of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Daniel has extensive experience in marketing, development of special U.S.-investment products, as well as customer acquisition and relationship management. His ultimate goal is to make a difference in his clients’ financial lives through honest investment advice. He strives to provide high-touch, personalized service and enjoys getting to know a client’s personality as it relates to their financial circumstances before crafting the right solutions. As money is a very personal subject, Daniel takes his responsibility as an advisor very seriously, forming long-term relationships with clients based on trust.

Daniel received his degree in finance and international business from New York University. Outside of the office, he is a hobby landscape, street photographer, and has a great interest in U.S. and European history (16th-19th centuries), believing it helps him answer the question “Why is something the way it is?”

About Petra

Petra Peters is a founding partner and the Chief Executive Officer of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Petra has decades of experience in the banking industry, asset management, overseeing the administration of individual accounts, and designing and advising specialized funds tailored to the requirements of international private and institutional clients. With extensive knowledge of both Europe and the U.S., she’s able to provide advice and services beyond the typical investment advisor. Petra desires for her clients to live a financially care-free life so they can pursue their passions, and she values their trust and gratitude. Creating invaluable friendships formed over years of partnership, some clients even consider her part of their family.

Petra’s interests outside of work include classical music, history, travel, charities, motorcycling, and golf. She is also on the board of a German charity.