3M Employees and the Question of a 3.9% Retirement Withdrawal Rate

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“3M employees should view the 4% rule as a flexible planning reference rather than a guarantee, because sustainable retirement income depends on adapting withdrawals to changing markets, inflation, and personal income sources—an approach we emphasize when guiding clients.” — Wesley Boudreaux, a representative of The Retirement Group, a division of Wealth Enhancement.

“3M employees often benefit most when they treat the 4% rule as a starting framework rather than a fixed outcome, focusing instead on flexibility, multiple income sources, and ongoing adjustments as retirement realities evolve.” — Patrick Ray, a representative of The Retirement Group, a division of Wealth Enhancement.

In this article, we will discuss:

1. How the 4% withdrawal rule originated and what it represents.

2. Why withdrawal strategies should remain flexible for 3M retirees.

3. How additional income sources and personalized planning affect long-term retirement outcomes.

Understanding the 4% Withdrawal Rule

The 4% withdrawal rule has long been considered a general guideline for retirees, including many 3M employees planning their transition from work to retirement. This approach is designed to help support income for roughly 30 years by withdrawing 4% of a retirement portfolio in the first year and then increasing that dollar amount annually to account for inflation.

In retirement planning conversations, this guideline is often referenced, but it is important for 3M employees to understand both what it represents and what it does not. It is a starting point for discussion, not a promise about future results.

The Origin of the 4% Rule

The roots of the 4% rule come from historical back-testing of U.S. market returns, most notably research by William Bengen and later studies commonly referred to as the Trinity Study. These analyses examined how long retirement portfolios lasted over 30-year periods when retirees followed a consistent, inflation-adjusted withdrawal approach.

The findings showed that, depending on market conditions and asset allocation, a 4% initial withdrawal often lasted through many historical periods. ¹  For 3M employees, it is important to remember that this research reflects historical market behavior and does not represent a promise about future market performance.

Retirement Planning Is Not Static

Longevity, interest rates, inflation, and market conditions all change over time. Because of this, withdrawal strategies should be viewed as planning tools rather than fixed rules that apply in every situation for every 3M employee.

Inflation has been especially impactful in recent years. U.S. inflation reached levels not seen in nearly four decades during 2022, ²  highlighting how rising prices can place added pressure on retirees who rely heavily on portfolio withdrawals and reinforcing the importance of adjusting withdrawal strategies over time.

Another major consideration is sequence-of-returns risk. Research shows that the order in which investment returns occur, especially in the early years of retirement, can significantly influence how long a portfolio lasts. ³  For 3M employees, weaker market returns early in retirement combined with steady withdrawals can reduce a portfolio’s ability to rebound over time.

What a Withdrawal Rate Really Means

A withdrawal rate is simply an initial estimate. For example, a 3.9% withdrawal on a $1,000,000 portfolio equals $39,000 in the first year, while a 4.0% withdrawal equals $40,000. For 3M employees, that difference is $1,000 per year for every $1 million saved.

In practice, withdrawals are often adjusted as circumstances evolve. Inflation, market performance, health care expenses, and the presence of other income sources all influence how much a retiree ultimately spends each year.

The Role of Other Income Sources

Portfolio withdrawals are only one component of retirement income. Many 3M employees also rely on additional sources such as:

- Social Security benefits

- Annuities

- Passive income from rental properties or other investments

Social Security, in particular, plays a key role. Benefits increase through delayed retirement credits for each year benefits are postponed beyond full retirement age, up to age 70. ⁴  This higher lifetime benefit later in retirement may help reduce reliance on portfolio withdrawals over time.

Flexibility Matters in Retirement

A withdrawal strategy does not need to remain unchanged forever. If markets perform well early in retirement, spending may be increased. If markets struggle, discretionary spending can be reduced temporarily. 3M employees who maintain flexibility are often better positioned to manage uncertainty without making permanent changes.

The purpose of retirement planning is not to anticipate markets with exact precision, but to develop an approach that can adjust to changing conditions while supporting long-term income needs.

Getting Personalized Guidance

While general guidelines can be helpful, retirement outcomes depend heavily on individual factors such as age, spending needs, asset allocation, tax considerations, and income sources. For 3M employees, reviewing how different withdrawal approaches affect long-term sustainability often requires individualized analysis.

The Retirement Group works with individuals and families to review retirement income strategies, portfolio withdrawals, and long-term planning considerations. If you would like help reviewing your personal retirement plan or withdrawal approach, you can call  The Retirement Group at (800) 900-5867  to speak with a specialist who can discuss your specific situation.

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Sources:

1. Bengen, William P. “Determining Withdrawal Rates Using Historical Data.”  Journal of Financial Planning , Financial Planning Association, Mar. 2004,
www.financialplanningassociation.org/sites/default/files/2021-04/MAR04%20Determining%20Withdrawal%20Rates%20Using%20Historical%20Data.pdf .

2. U.S. Bureau of Labor Statistics.  Consumer Price Index — June 2022 . U.S. Department of Labor, 13 July 2022,
www.dol.gov/newsroom/economicdata/cpi_07132022.pdf .

3. Securian Financial Group, Inc.  Sequence of Returns Risk . Rev. Feb. 2025, Securian,
www.securian.com/content/dam/doc/ia/sound-strategies-sequence-of-returns-risk_57879-102.pdf . 

4. Social Security Administration.  Retirement Benefits . Publication no. EN-05-10035, U.S. Government Printing Office, n.d.,
www.ssa.gov/pubs/EN-05-10035.pdf .