After years of building financial assets for yourself, the time will come when you have to withdrawal on these assets to live comfortably. This time is called retirement. You should carefully examine a few factors before deciding exactly how much you should withdrawal annually.
First, consider your age and health. Estimate how long you think you will be around. Remember that life expectancy rates are continuing to climb in the US. Consider certain factors like if you are a smoker, or if you exercise regularly. There is a 50% chance that healthy 65 year-old-man could live to age 85 and a woman in good health could live to age 88. If these people retired at age 65, they could be withdrawing for 20-30 years.
After estimating your life expectancy, you need to think about inflation, which is hte tendency for prices to increase over time. Over the past 50 years, US consumer price inflation has averaged 4% annually. You might assume that it will continue this trend and predict 4% annual inflation for your portfolio. Plan according to inflation, and you may need to withdrawal more if inflation becomes greater.
Lastly, when considering how much your investments will return during the course of your retirement it is not the safest bet to look at historical averages because returns usually fluctuate. Your best bet is to choose a more conservative withdrawal rate in the early years of retirement just in case of a market downturn or jumps in inflation.

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