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.