Withdrawal Rate
The percentage of your portfolio you withdraw in a given year to fund living expenses.
Your withdrawal rate is simply the amount you take from your portfolio in a year divided by the portfolio's value. Withdraw $40,000 from a $1,000,000 portfolio and your withdrawal rate is 4%. It's the central dial of any drawdown plan: too high and you risk depletion, too low and you may be under-living a portfolio you worked hard to build.
It's closely tied to the safe withdrawal rate, which is the rate research suggests is sustainable over a long retirement. Your actual withdrawal rate can and often should vary year to year — lower after market drops, higher in strong years — rather than staying mechanically fixed.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.