I just retired at age 61 and left my $145,000 salary – how much can I pull from my nest egg every year without the fear of running out of money?

Running out of money in retirement is one of the top fears of soon-to-be retirees for a reason. It is surely one of the nastiest wakeup calls one can get. Not only is it painful to have to return to work after enjoying the first few years of enjoyment, but one may also struggle to land the salary one had before leaving the workforce. Also, there’s no guarantee that one will be able to do their job effectively in their golden years.

Indeed, the fear of having your retirement nest egg run dry is also shared by high net worth individuals who have more than enough and everything in order. Of course, catastrophes can happen (think emergency healthcare expenses or violent stock market meltdowns) and they may put some seemingly sound retirement plans on the ropes.

That’s why retirees who are doubtful about the sustainability of their nest egg should err on the side of caution and get a registered financial planner to give everything a second look. Though being overly conservative with your investments in retirement could limit growth, the important thing is that you’ve got enough of a cushion to pad the fall if the catastrophic scenario you envision actually ends up coming to fruition.

At the end of the day, retirees shouldn’t over-extend themselves on risk, whether by increasing their withdrawal rate markedly above 4% or shooting for an asset allocation (too heavy in the stocks?) that entails too much volatility.

Market crashes and corrections can happen. And with the stock market reeling over Trump tariffs, many stock-heavy retirees have gotten the memo to fasten the seatbelt or rebalance to lower the implied volatility of a portfolio.

Enter the case of a 61-year-old new retiree

In this piece, we’ll look at the specific case of a 61-year-old retiree who left their $145,000 salary behind. They’ve got a solid nest egg built up (close to $2 million in a 401(k)), ample assets spread in other tax-advantaged accounts, as well as a considerable sum in cash and CDs (Certificates of Deposit). Indeed, they’re invested well, with a good amount of liquidity. On the surface they look quite well-positioned to enjoy a long retirement.

With a spouse, 55, who’s still working and contributing to a seven-figure retirement nest egg of their own, it looks like there’s really no need to fear running out of money. That is, unless they have plans to upgrade their lifestyle by a few notches after they’ve retired!

With hefty college expenses ahead for their child, though, the newly-retired individual should aim to keep their spending within the budget. Indeed, the college bills can really add up, especially if the child opts to get multiple degrees or even a PhD. In any case, our new retiree has ample liquidity (CDs and cash) to cover the difference if funds within the 529 come up short.

Ideally, it’d be best not to touch the portion of the nest egg invested in stocks, especially given the high chance of a correction as tariff tremors continue through March, April, and perhaps through the summer months.

With such hefty college expenses to think about and a lingering fear of running out of cash in retirement, I’d suggest being more conservative with the withdrawal rate. As always, check in with a financial advisor before making a move, as they can gauge your risk tolerance and fear levels better than I can!

What’s a good withdrawal rate to target?

In any case, the “4% rule” is a common rule of thumb followed by many retirees. It entails drawing down 4% of the nest egg in any given year. If the math checks out ($3.6 million in total investable assets), a 4% withdrawal rate would entail just shy of $145,000 per year — a pretty handsome sum for a comfortable retirement.

Seeing as there’s an uptick in stock volatility and lofty expenses coming due in the near-future, in my opinion, I think skewing more towards a 3% (or a tad lower) withdrawal rate is prudent, given our retiree seems to be quite cautious (heavy exposure to risk-free assets like CDs, cash) and still a bit fearful of running out of cash in retirement. For a $3.6 million nest egg, a 3% withdrawal rate would entail drawing down $108,000 per year — still a very respectable sum.

As always, see a financial advisor for the right withdrawal rate. If one’s annual expenditures are expected to be far less than $108,000, the option to go for an even lower withdrawal rate is there. Personally, I think anywhere from a 2.5-3.0% withdrawal rate makes sense.

In any case, the good news for our retiree is that their wife is still working and likely can continue working for another 5-10 years.

Should the market crumble and college expenses end up being higher than expected, the possibility for them to keep working is always there. It’s always nice to have such options. All considered, I’d say our new retiree is in great shape, with enough flexibility to consider a conservative withdrawal rate that’d allow for greater peace of mind in retirement.

The bottom line

Remember, a withdrawal rate isn’t set in stone! In fact, adjusting it on the fly based on the environment or expectation for large expenses could be the way to go. If stocks are reeling and tuition expenses are coming due, a lower withdrawal rate can make sense. It can always be increased later on (towards 4%) once one’s comfort level improves.

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