The 4% rule is a well-known withdrawal rate for retirees, but a new Morningstar report challenges the current standard, saying it is now “outdated.” The formula for determining how much you should withdraw from your retirement is complicated however, because every person’s financial needs, tolerances for risk, and resources are so different.Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.Morningstar researchers analyzed the 4% withdrawal rate in a report called: “The State of Retirement Income: Safe Withdrawal Rates.” (1) Their analysis includes forward-looking estimates on portfolio performance and inflation, and determined that the current rate of 4% should be reduced to 3.3%.“The State of Retirement Income”They used a 30-year window of time for their calculations, a 90% probability for success which means there’s a 90% chance you will “not” run out of money during your lifetime, and a portfolio that is split between stocks and bonds.Morningstar’s Christine Benz says that market conditions have boosted retirement portfolios in recent years, and that retirees may be lulled into thinking they’ll get similar results in the future. But she doesn’t expect that to happen, which would reduce the amount of anticipated gains, and retirement income.Currently, we have high stock prices, and low bond yields. Inflation is high at the moment but it has been low for a long time, and Morningstar expects inflation rates will settle back down over the long term. Benz told CNBC that, going forward, she expects to see a different set of economic circumstances. (2)According to Benz and the Morningstar analysis, stocks will likely fall to more average valuation levels, while bond yields rise. Based on this possible scenario, she says the withdrawal rate should be reduced to about 3.3%, as a general rule.Safe Withdrawal Rate for RetireesThe “safe withdrawal rate” has changed over the years depending on market conditions, and can be viewed as more of a “range” that is influenced by personal circumstances. Over the last 90 years, withdrawal rates have gone from about 2.4% for someone with all bonds in their portfolio to 6.5% for someone with all stocks. The figures vary a lot depending on your time horizon, and what success rate you choose depending on your risk tolerance. So, a 6.5% withdrawal rate for an all-stock portfolio with a 90% success rate was common from 1975 through 1999. More recently, that withdrawal rate was more like 5.3% for the same stock portfolio and a 90% success rate.Morningstar also points out how you can withdraw more or less depending on the success rate that you choose. For example, if you have a 50% stock portfolio, and want a 100% success rate, you could start with a withdrawal rate of just 1.9%. That’s over a 30-year time horizon. If you are not worried about running out of money, and you are okay with a 50% success rate, then you could withdraw 4.7%.Conservative Approach to WithdrawalsThe bottom line: Like the 4% figure, the 3.3% figure is considered “conservative.” It’s based on what Morningstar expects to be lower returns in the future, but also follows a conservative approach to withdrawals.But remember, this is supposed to be the “starting rate.” Like social security, you can give yourself a cost-of-living increase each year that raises the amount. There are also other factors and strategies that play into the amount a retiree should withdraw, such as your anticipated life span, your lifestyle and how much money you need to support it, when you plan to start taking social security, other income sources such as pensions or real estate gains and income, and how much you have in your accounts.Some people take a flexible approach to withdrawals, depending on how the market is doing and how their investments are doing. During a down year, you might reduce your percentage and forgo the COLA, for example. As CNBC recommends, a conservative str