Safe Withdrawal Rates in NZ 2026: The 4%, 6% and Spend-Down Rules Explained

Does the US 4% rule work in New Zealand? The NZ rules of thumb, the 6% rule, divide-by-years, and how NZ Super lets you safely draw more from your savings.

A common question in retirement planning is: "How much can I take out each year without running out?" Finding your safe withdrawal rate in NZ is rarely about one magic number, but there are a handful of well-tested New Zealand rules of thumb that get you most of the way there, and they look quite different from the American "4% rule" widely discussed online.

This guide explains what a safe withdrawal rate is, why the NZ Society of Actuaries lands on roughly 6% a year at age 65, why NZ Super lets you draw harder from your own savings than overseas retirees can, and how an adviser sets and reviews your rate every year so it bends with your portfolio instead of breaking it.

TL;DR: how much can you safely spend from savings each year in NZ?

TL;DR: For a New Zealander retiring at 65, the NZ Society of Actuaries' simplest rule of thumb is to spend about 6% of your starting savings in year one — roughly $6,000 per $100,000 — on top of NZ Super, and keep that dollar figure flat ¹. The US "4% rule" is more conservative because it ignores NZ Super ².

Does the US 4% rule work in New Zealand?

The 4% rule comes from 1990s US research: withdraw 4% of your portfolio in the first year of retirement, then increase that dollar amount by inflation every year after, and historically your money lasted at least 30 years. It is a sound idea, but it was never built for a New Zealander.

Two things make it too conservative here. First, it assumes you have no other guaranteed income — but almost every NZ retiree receives NZ Super, a government pension paid until you die and indexed to wages. Second, it plans for a full 30-year horizon with inflation indexing baked in, which deliberately leaves a large cushion (and often a large unspent balance) at the end.

The NZ Society of Actuaries' Retirement Income Interest Group (RIIG) adapted the idea into an Inflated 4% Rule: take 4% of your starting fund in year one, then lift that dollar amount by inflation each year after ². It is the closest local cousin to the American version, and it is the cautious end of the NZ range. For most Kiwis, starting at 4% means underspending the early, healthy retirement years and dying with money you could have enjoyed.

The NZ rules of thumb: the 6% rule and divide-by-years

The Retirement Commission (Te Ara Ahunga Ora) and the NZ Society of Actuaries publish four plain-English "Rules of Thumb" for spending down your savings. They are deliberately simple so you can run them on the back of an envelope.

The 6% rule

This is Mary Holm's and the actuaries' headline number. At 65, spend 6% of what you start with — $6,000 a year per $100,000 — and keep that dollar figure flat ¹. (Mary Holm often frames the same idea as "$100 a week per $100,000," which works out a touch lower, around 5.2% a year, so treat 6% as the upper, simplest version of the rule.) It is simple, it front-loads spending into the years you are fittest to enjoy it, and because NZ Super is doing the inflation-proofing in the background, you do not need your savings to last 40 years on their own.

Divide-by-years (Fixed Date and Life Expectancy)

If a flat 6% makes you nervous, the divide-by-years approach self-corrects. Each year you divide your current balance by the number of years you want it to last ³. Want it to last 20 years? Take 1/20th this year, 1/19th next year, and so on. Because you recalculate off the real balance every year, a bad market year automatically shrinks the next withdrawal — you can never hit zero with this method, though the payments do get smaller late in life.

What withdrawal rate is sustainable for a 25-30 year retirement?

A 65-year-old Kiwi today can reasonably plan for savings to last 25 to 30 years. The sustainable rate depends almost entirely on your investment return after tax and fees.

A middle-ground approach favoured by NZ commentators such as MoneyHub is to take a 5% initial withdrawal that rises with inflation, assuming a modest real return after tax and fees ⁶. That 5% sits sensibly between the cautious 4% and the spend-it-now 6%: if your portfolio earns a little above 5% a year after tax and fees, your capital is broadly preserved in the early years; if it earns less, you spend it down faster.

The figure below shows why the gap between these rates matters so much over a long retirement.

Figure: How long savings last at 4%, 5% and 6% withdrawal rates (illustrative). Line chart of portfolio depletion paths at 4%, 5% and 6% annual withdrawals, modelled on a return of roughly 5% a year after tax and fees over 25-30 years. At 4% the balance grows; at 5% it is roughly stable then slowly declines; at 6% it depletes within the 25-30 year window. Source: modelled on a ~5% after-tax, after-fees return in line with NZ drawdown commentary ⁶ and NZ Society of Actuaries rules of thumb ¹²³. Figures are illustrative; your own return drives the actual outcome.

The key insight: at a return of around 5% a year after tax and fees, 4% leaves you richer than you started, 5% holds roughly steady for two decades, and 6% deliberately spends the capital down over a normal retirement. None of these is "wrong" — 6% is the right answer if you would rather enjoy the money than leave it behind, and 4% is right if a long life or a legacy is the priority.

How NZ Super changes your safe withdrawal rate

This is the single biggest reason a Kiwi can spend harder than an American retiree: you start retirement with a guaranteed, inflation-linked income floor that you did not pay a cent of capital for.

As of 1 April 2026, NZ Super (tax code M, after tax) pays:

Because NZ Super covers your essential, inflation-proofed baseline, your savings only need to fund the extras — travel, a newer car, the grandkids, eating out. That means you can run your own capital down to (or near) zero over your lifetime without the catastrophe an uninsured American retiree would face. It is precisely why the NZ rules of thumb sit at 5-6% while the US default sits at 4%.

A common mistake is to anchor to the "4%" headline, underspend for years, and overlook the role NZ Super plays in covering essentials. The aim is to set a rate that fits your circumstances rather than a generic default. You can sketch your own numbers with the retirement calculator, then pressure-test them in a retirement planning session.

Inflation-adjusted vs fixed withdrawals: which lasts longer?

This is where the rules genuinely diverge, and it is worth understanding before you pick one.

• A fixed-dollar withdrawal (the 6% rule) keeps your number the same every year — say $18,000 from a $300,000 balance. Your portfolio lasts longer because the withdrawal does not grow, but inflation slowly erodes what that $18,000 buys. The actuaries are comfortable with this because NZ Super is indexed to wages and rises every year, protecting your essentials ¹.
• An inflation-adjusted withdrawal (the Inflated 4% rule) grows your dollar figure each year to preserve purchasing power, which is gentler on your lifestyle but heavier on your capital, so you must start lower at 4% ².

So which lasts longer? The fixed 6% and the inflation-indexed 4% are designed to last about the same time — they just trade off in opposite directions. Fixed withdrawals keep more capital but lose purchasing power; indexed withdrawals protect purchasing power but burn capital faster, which is why they start lower. The divide-by-years methods sidestep the question entirely by never letting you run out ³.

The risk of drawing too much too early: sequence risk

Here is the trap that catches new retirees. Sequence-of-returns risk is the danger that a market downturn in the first few years of retirement does outsized, permanent damage — because you are selling units to fund withdrawals at exactly the wrong time, and there are fewer units left to recover when the market rebounds.

Two retirees can earn the same average return over 25 years and end up wildly differently off, purely because of when the bad years hit. A 20% fall in year two of retirement is far more damaging than the identical fall in year 22.

There are three practical defences:

1. Start nearer 5% than 6% in the first few years if markets are expensive or volatile, then revise upward once you are clear of the danger zone.

2. Hold a cash buffer — typically one to two years of withdrawals in cash or a conservative fund — so you can pause selling growth assets during a downturn.

3. Use a divide-by-years or annually-reviewed rate, which automatically trims the next withdrawal after a bad year ³.

Getting your KiwiSaver fund mix right before you start drawing is half the battle — a 65-year-old wholly in a growth fund is more exposed to sequence risk than one in a balanced fund. At decumulation many retirees move from a high-growth option into a balanced or conservative fund — the balanced and conservative funds from providers such as Simplicity, Milford, Fisher Funds, Generate, Booster or Kernel are the kind of options a retiree would actually shift into — to soften that early-years volatility. A KiwiSaver review at the point of retirement is the cheapest insurance against this.

How an adviser sets and reviews your rate each year

No rule of thumb survives contact with a real retirement. Markets move, health changes, one partner dies, a roof needs replacing. The point of an adviser is not to pick a magic number on day one and walk away — it is to review the rate every year so it stays sustainable.

The review loop looks like this:

1. Set the starting rate based on your savings, NZ Super, fund mix, health, and whether you want to leave a legacy — usually landing between 4% and 6%.

2. Recalculate annually off your actual current balance, not the original plan, so good and bad market years feed straight back into next year's spend.

3. Check the fund mix each review — your KiwiSaver and managed funds should hold enough growth assets to outpace inflation but enough defensive assets to ride out a downturn without forced selling. Balanced and conservative options across providers like Simplicity, Milford, Fisher Funds and Booster can be compared on their merits.

4. Adjust for life, not just markets — a couple becoming a single household, a move into care, or a one-off capital cost all change the safe rate.

Many people have already retired and spent a year or two guessing, often erring too cautiously. Setting the rate to where it should be, and confirming it is sustainable, is the practical value of an annual review.

Frequently asked questions

Is the 4% rule safe in New Zealand? Yes — arguably too safe. The Inflated 4% Rule (4% of your starting fund in year one, then rising with inflation) is the cautious end of the NZ range ². Because it ignores NZ Super and plans for a full 30-year inflation-indexed horizon, most Kiwis who use it end up underspending and leaving a large unspent balance.

What is the 6% rule for retirement spending? The 6% rule says a 65-year-old can spend 6% of their starting savings each year — about $6,000 a year per $100,000 — and keep that dollar figure flat, on top of NZ Super ¹. It front-loads spending into your healthiest years and relies on NZ Super to inflation-proof your essentials.

How does NZ Super affect my safe withdrawal rate? NZ Super gives you a guaranteed, inflation-linked income floor — $28,868 a year for a single living alone, or $44,412 combined for a qualifying couple, as of 1 April 2026 ⁴. Because it covers your essentials, your savings only fund the extras, so you can safely draw a higher rate (5-6%) than overseas retirees who have no equivalent pension.

Should I increase my withdrawals for inflation? It depends on the method. The 6% rule deliberately stays flat because NZ Super is doing the inflation-proofing ¹. The Inflated 4% rule grows with inflation but starts lower to compensate ². The trade-off is unavoidable: protecting your purchasing power means starting at a lower rate.

What return should I assume in retirement? NZ drawdown commentators such as MoneyHub typically illustrate a 5% withdrawal approach built on a modest real return after tax and fees ⁶. The exact figure depends on your fund mix and PIR — a balanced KiwiSaver fund from a provider like Simplicity, Milford or Fisher Funds typically targets returns in this range over the long run, but you should model your own situation rather than assume.

Can I run out of money using these rules? The fixed 6% and 4% rules can theoretically deplete capital if markets disappoint, which is why they need annual review. The divide-by-years methods (Fixed Date and Life Expectancy) can never reach zero because each year you take a fraction of the current balance ³ — the trade-off is smaller payments late in life.

General information, not personalised financial advice. Seek advice tailored to your situation before acting. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 16 June 2026.