Safe withdrawal rate NZ: the 4% rule and what works here

On New Zealand's official assumptions, the 4% rule is not safe if you need your money to last to 95. Taking 4% of savings in the first year and raising it with inflation lasts to 95 in only 23% of our 1,000 simulated markets, and to 90 in 60%. The level amount that lasts to 95 in 9 of 10 markets is about 2.7% of your savings a year, or $236 a week from $450,000. That sounds low, but in New Zealand your savings are not doing the job alone: NZ Super pays a floor for life. This guide explains the 4% rule, Sorted's four rules of thumb, and what this site uses. Rules checked 12 November 2026.

What the 4% rule is

The 4% rule is an American rule of thumb. You take 4% of your savings in the first year of retirement, then increase that dollar amount each year with inflation, whatever markets do. On $450,000 that is $18,000 in year one and $18,360 in year two with 2% inflation.

It came out of US research using US share and bond returns over long historical periods, for a 30-year retirement. It has three hidden assumptions that do not carry neatly to New Zealand:

1. Returns. It assumes a fairly growth-heavy portfolio earning US-style returns.
2. No floor. It treats your savings as your main income, with no NZ Super underneath.
3. Before-tax figures. US accounts are often tax-deferred; in New Zealand most funds are taxed inside the fund as they go.

Sorted's retirement navigator, built by the Retirement Commission with New Zealand actuaries, includes a version: the "inflated 4% rule". Sorted describes it as calculating "4% of the starting amount of your invested savings" in the first year, then increasing withdrawals each year for inflation, which Sorted's page assumes is 2%.

Why New Zealand is different

NZ Super is a floor

NZ Super pays $555.15 a week to a single person living alone and $854.08 to a couple (net at the M tax code, from 1 April 2026), for life, rising each year with prices or wages. It does not depend on markets. The Retirement Commission calls NZ Super "an annuity" in its 2022 decumulation paper. So for most New Zealanders the question is not "will I have any income?" but "how much extra can my savings add on top?"

Lower assumed returns after 65

The government's own projection assumptions, in Schedule 7A of the Financial Markets Conduct Regulations 2014, use a return of 2.5% a year after fees and tax from 65, whatever fund you are in, with inflation of 2%. Every KiwiSaver annual statement uses them. After inflation that is a real return of only about 0.49% a year. Sorted's retirement calculator uses 3.5% instead, so official tools do not fully agree. We use 2.5% by default so that our figures match KiwiSaver statements and KiwiSaver Calculator NZ.

PIE tax is already taken off

KiwiSaver and most managed funds are portfolio investment entities (PIEs). Tax is deducted inside the fund at your prescribed investor rate (10.5%, 17.5% or 28%). The 2.5% assumption is after tax at 28%, according to the FMA. Our tax on retirement savings guide explains why many retirees can use 17.5%.

Sorted's four rules of thumb

The Sorted retirement navigator, launched on 16 June 2025, offers four rules developed with the New Zealand Society of Actuaries' Retirement Income Interest Group. The Retirement Commission's 2025 Review of Retirement Income Policies recommends building on these rules in "a nationally consistent decumulation framework". The four are:

The fixed date and life expectancy rules recalculate every year, so they adapt to markets but never pay a fixed amount. With $450,000, the fixed date rule to 90 gives $18,000 in the first year ($450,000 divided by 25). The life expectancy rule for a woman born in 1961, whose life expectancy at 65 is 23.7 years in Stats NZ's March 2026 cohort tables, gives about $18,987; for a man born in 1961 (21.1 years) about $21,327.

The rules tested with New Zealand assumptions

We ran each fixed-amount rule on $450,000 at 65 through our 1,000 simulated markets: an average return of 2.5% after fees and tax, a yearly swing of 6% (our assumption), and 2% inflation. We also ran them with fixed 2.5% returns every year.

The 6% rule also loses buying power: $27,000 in 20 years' time buys what about $18,171 buys today at 2% inflation. That is by design; it front-loads spending. The research brief behind Sorted's rules (Investment News, 7 August 2023, a secondary source) says the 6% rule is "almost certain" to deliver its income until about 82, under the actuaries' higher return assumption of 4.5% for a balanced fund.

The fixed date and life expectancy rules are not in the table because they never "run out" in the same way: they recalculate each year. The fixed date rule empties the account at the chosen age, on purpose.

What this site uses, and why

Our calculators do not use a fixed percentage. They find the most you can spend each week, the same in today's dollars every year, that lasts to your planning age in 9 of 10 simulated markets. As a share of savings at 65 that works out at:

The rate depends on how long you plan for, much more than on the fund. If you choose a balanced fund in retirement (3.5% average, our 9% swing), the fixed-return rate to 95 rises to 4.1%, but the 9 in 10 rate stays at about 2.7%, because bigger swings widen the range of outcomes. Our fund type guide has the detail.

Why 9 in 10 and not the average? An average market is a coin toss: half the time it does worse. Why 95 and not 90? Because a 65-year-old woman today has about a 50% chance of reaching 90 in Stats NZ's cohort tables. Our life expectancy guide sets out the odds.

All of these are our modelling choices, shown on the methodology page and editable in each calculator.

How to use a withdrawal rate sensibly

• Start with NZ Super. Work out your NZ Super with the NZ Super calculator, then ask what you need on top.
• Use a rate as a check, not a rule. A 2.7% to 3.6% range for a 30-year plan is a sense check. Your own figure depends on your age, spending and other income.
• Be willing to adjust. A rule that cuts spending a little when savings fall well behind plan, such as guardrails, starting at the same safe pay, lasted to 95 in 99% of our markets rather than 90%.
• Watch the first ten years. Poor returns early do the most damage; see our sequence of returns guide.
• Run your own numbers. The drawdown strategies calculator compares four approaches with your savings, and how much do I need works backwards from spending.

This is general information, not financial advice.

Questions

Is 4% a safe withdrawal rate in New Zealand?

Not for a 30-year retirement on the official 2.5% return after 65. In our 1,000 markets an inflation-linked 4% lasted to 95 only 23% of the time. NZ Super still pays after savings run out, so running out is less severe than in countries without a universal pension.

What withdrawal rate does Sorted recommend?

Sorted does not set one rate. Its retirement navigator offers four rules of thumb: the 6% rule, the inflated 4% rule, a fixed date rule and a life expectancy rule, each suited to different goals.

Why is the safe rate lower in NZ than overseas?

Mainly because the government's projection assumptions use a 2.5% return after fees and tax from 65, only about 0.5% a year above inflation. Overseas research usually assumes growth-heavy portfolios and before-tax returns.

Does a growth fund let me withdraw more?

On average, yes. But in our simulations the amount that held in 9 of 10 markets barely changed, because a growth fund's bigger swings make poor outcomes worse as well as good ones better.