Why might the 4% rule be too restrictive?

The 4% rule may be too restrictive because it does not account for individual longevity, changing spending patterns, and other income sources, potentially leading to underspending.

How can retirees avoid underspending?

Retirees can avoid underspending by considering their expected lifespan, spending needs, and financial goals, and by adjusting their withdrawal strategy accordingly.

What factors should be considered in retirement planning?

Retirement planning should consider longevity, spending patterns, income sources, investment performance, and financial goals.

J.P. Morgan Retirement Expert Warns the 4% Rule May Leave Savers With Too Much Money

The traditional 4% strategy may not fit every retiree as spending needs shift and income gaps grow

Michael Conrath, chief retirement strategist at J.P. Morgan Asset Management, says the traditional 4% retirement withdrawal rule could cause some retirees to underspend and accumulate more money than they need.

The 4% rule involves withdrawing roughly 4% of a portfolio in the first year of retirement and then adjusting the dollar amount for inflation. It has traditionally been used as a framework for a 30-year retirement.

But Conrath argues retirement planning should account for longevity and changing spending patterns. He has cited research showing a 44% chance that at least one member of a healthy 65-year-old couple will live to 95 or beyond, highlighting the possibility of retirement lasting longer than 30 years.

Why the 4% Rule May Be Too Restrictive

The 4% rule is designed to reduce the risk of retirees exhausting their portfolios. But Conrath has argued that a rigid approach can create another problem if people become overly cautious about spending. J.P. Morgan's retirement research examines how spending changes during retirement and how withdrawal strategies can affect retirement outcomes.

Automatically increasing withdrawals with inflation may therefore not reflect every retiree's actual spending needs. Conrath's broader argument is that retirement-income strategies should consider longevity, spending patterns, and other sources of income rather than relying on one withdrawal percentage.

The Risk of Underspending in Retirement

A retiree who focuses too heavily on preserving their portfolio may spend less than their financial circumstances allow. That could leave them with substantially more wealth at the end of life than they intended to preserve. It may also result in a larger legacy than planned.

The issue is therefore not simply whether a portfolio survives for 30 years. Retirees also need to consider how much income they require, how long they may live, and how much wealth they actually want to leave behind.

Longer Lives Change the Calculation

Longevity is central to Conrath's argument. He has cited a 44% probability that at least one member of a healthy 65-year-old couple will reach age 95. J.P. Morgan's retirement guidance also includes life-expectancy probabilities as part of retirement planning.

A longer retirement does not automatically mean someone should withdraw less. The appropriate strategy depends on savings, guaranteed income, spending needs, investment performance, and expected longevity.

Small Contributions Can Build Wealth

Conrath has also highlighted the potential benefits of making small increases to retirement contributions. J.P. Morgan's retirement research examines early and consistent investing, as well as automatic increases in contributions.

The broader message is that workers do not necessarily need to wait until they can make large contributions. Regular increases over a long career can improve retirement readiness.

The 401(k) Mistake to Avoid

Conrath has also warned about the impact of loans and withdrawals on retirement savings. J.P. Morgan research examines how plan loans, contribution rates, and other financial pressures affect retirement readiness.

Using retirement savings to meet short-term needs can reduce the assets available later, particularly if contributions are also reduced.

Many Workers Do Not Know Their Target

Another challenge is knowing how much is actually needed for retirement. Conrath has highlighted the importance of establishing a clear retirement target and assessing whether current savings and contributions are sufficient.

J.P. Morgan's research similarly focuses on income replacement, savings rates, and retirement-readiness targets rather than applying one savings figure to every household. Without a clear target, workers may struggle to determine whether they are on track or need to increase contributions.

Time in the Market Over Market Timing

Conrath has also emphasised the importance of staying invested rather than attempting to predict short-term market movements.

J.P. Morgan's 2026 guidance says market declines are a normal part of investing and encourages investors to maintain a long-term perspective during periods of volatility. Its retirement guidance also highlights diversification and aligning investments with long-term goals.

Retirement Planning Goes Beyond the 4% Rule

Conrath's broader retirement guidance considers spending, investment strategy, Social Security, and longevity together. J.P. Morgan's 2026 retirement guide also examines retirement income, spending volatility, and emergency savings.

Ultimately, the 4% rule is a guideline rather than a universal formula. Conrath's argument is that retirees should consider their expected lifespan, changing spending needs, income sources, and financial goals rather than treating one withdrawal rate as a rigid rule. For some retirees, that could mean spending more of their savings during their lifetime instead of preserving money they may never need.