The question
"When I retire, how much can I take out each year? And what happens if the market drops right after?"
The idea
- In retirement, money flows the other way: you draw from your savings each year instead of adding to them. A common starting point is the 4% rule of thumb: take 4% of your savings in the first year. (The usual version raises that dollar amount each year to keep up with rising prices. Here we keep it flat.)
- The risk is a fall early on. When the balance drops, the same dollar draw becomes a bigger share of what's left, and the dollars you take out are no longer there to recover.
Worked example
We'll use ETFIQ Strategic, 60% stocks, one of ETFIQ's benchmarks: a fixed mix of low-cost index ETFs, about 60% stocks, reset to that mix each month.
ETFIQ began tracking it on Oct 5, 2026; earlier years apply its rule to past prices, so they are hypothetical. All returns below are its calendar years, from one table, with prices to Nov 10, 2026.
Start with $500,000 on the first day of 2022. The draw is 4%: $20,000, set aside at the start of each year to live on.
Step 1. 2022, a bad year: the mix fell 15.83%.
- Take $20,000: $500,000 − $20,000 = $480,000
- Fall: $480,000 × (1 − 0.1583) = $404,018
Dollar results use each year's unrounded return, so multiplying the rounded returns shown can differ by a few dollars.
Step 2. Look at the next draw. $20,000 was 4% of $500,000. Now it is $20,000 ÷ $404,018 = 4.95% of what's left. Same dollars, bigger bite.
Step 3. The next three years were good: +15.32%, +10.26%, +16.19%.
| Year | Start, after the $20,000 draw | Return | End |
|---|---|---|---|
| 2022 | $480,000 | −15.83% | $404,018 |
| 2023 | $384,018 | +15.32% | $442,865 |
| 2024 | $422,865 | +10.26% | $466,245 |
| 2025 | $446,245 | +16.19% | $518,485 |
After four years and $80,000 taken out, the balance was back above $500,000.
Step 4. Now double the draw to 8%, $40,000 a year, over the same four years. The balance ends 2022 at $387,184 and 2025 at $415,208: still $84,792 short of where it began, even after three strong years.
A bad year early hurts most when the draw is large. The 4% draw had room to recover. The 8% draw kept selling into the hole.
The 4% here is an example for learning, not a plan.
The common mistake
"A mix with fewer stocks can't have a bad year." In 2022, bonds fell along with stocks. ETFIQ's 20% stock benchmark lost 13.92%, not far from the 60% mix's 15.83%, while the all-stock US benchmark lost 19.49%. Fewer stocks usually means smaller swings, not no swings. Check a mix's worst year before relying on it.
Check your understanding
Pick an answer to see why. Two of three right passes the lesson.
1. After a fall, what happens to a fixed-dollar yearly draw?Answer: D. It grows as a share of the balance. the same dollars come out of a smaller pile. Not C: 4% was set on the starting balance, not on whatever is left.2. Pat has $300,000 and takes $12,000 at the start of the year. The rest falls 20%. What share of the new balance is next year's $12,000?Answer: B. About 5.2%. ($300,000 − $12,000) × 0.8 = $230,400, and $12,000 ÷ $230,400 is about 5.2%. Not A: that was the share before the fall.3. In 2022, ETFIQ's 20% stock benchmark fell 13.92%. What does that show?Answer: A. A lower stock share doesn't rule out a large loss in one year. bonds fell with stocks that year, so even a bond-heavy mix lost. Not C: over 2022 the 60% mix still fell further.
Takeaways
- A fixed draw becomes a bigger share of the balance after a fall.
- The larger the draw, the harder it is to recover from an early bad year.
- Look up a mix's worst calendar year on ETFIQ before planning withdrawals from it.