A 3% withdrawal rate may sustain a $920,000 portfolio if Social Security COLAs exceed 2% annually, but lagging adjustments erode purchasing power.
A 67-year-old retiree with $920,000 in savings and a $2,800 monthly Social Security benefit requires a 3% annual withdrawal to cover a $24,400 spending gap. This rate appears sustainable for a $58,000 annual budget, assuming stable inflation and cost-of-living adjustments (COLA).
The plan’s viability hinges on COLAs outpacing inflation over 28 years. If adjustments fall below 2%, the portfolio must absorb thousands in lost purchasing power, jeopardizing long-term stability. Prior projections often assume consistent COLA growth, but historical variability introduces risk.
Strategies like maintaining a 24-month cash buffer, purchasing annuities at 75, or reducing withdrawals after market declines can mitigate risks. Without these measures, even a well-funded retirement plan may face shortfalls.