The 5 Percent Income Strategy More Retirees Are Switching To in 2026

Core Insights - The shift from a traditional 4% withdrawal strategy to a 5% strategy is gaining traction among retirees due to rising living costs and healthcare expenses [2][6] - A 5% withdrawal rate allows for greater spending power, translating to $50,000 annually from a $1 million portfolio compared to $40,000 under the 4% rule [3][6] - The strategy emphasizes income generation through diversified assets like dividend ETFs and bond ladders, reducing reliance on selling shares during market downturns [4][5][6] Group 1: Market Performance and Retiree Strategies - The year 2025 saw significant growth in market performance, leading to sizable returns for investors who remained invested [1] - Retirees are increasingly adopting a 5% income strategy to enhance their financial stability and spending power in light of economic pressures [2][3] Group 2: Financial Instruments and Income Generation - The rise of stronger dividend ETFs, bond ladders, and monthly-pay REITs is reshaping income generation strategies for retirees [4] - A well-performing equity market can provide a cushion for percentage withdrawals, while a downturn necessitates a temporary reduction in spending [5]