Sustainable Withdrawal Strategies: Don’t Outlive Your Savings

By Brett Gottlieb

One of the greatest concerns for retirees and those nearing retirement is the possibility of outliving their savings. After years of disciplined saving and investing, the challenge shifts to a new phase: decumulation. Effective withdrawal strategies can help you draw down your assets in a way that supports your lifestyle for the long haul.

Navigating this stage takes more than guesswork. It requires thoughtful planning and a deep understanding of how different withdrawal methods respond to market volatility, inflation, and unexpected life events. Relying on a simple fixed-percentage approach might feel safe, but it can leave you vulnerable over time.

In this article, I explore a range of sustainable withdrawal strategies designed to help you create a reliable income stream in retirement so you can enjoy the life you’ve worked hard to build, without the constant worry of running out.

The 4% Rule: A Starting Point, Not a Silver Bullet

The 4% rule has been a widely accepted guideline for retirement withdrawals for a long time. According to this guideline, retirees can take out 4% of their initial retirement portfolio balance in the first year. In later years, they can alter that amount for inflation.

The 4% rule provides a straightforward foundation, but it’s important to understand that it has limitations and isn’t a panacea. Its appropriateness for certain retirees can be influenced by a number of factors, including:

• Longevity: Since people are living longer, their savings may need to survive for more than 30 years.
• Market volatility: Even with a moderate withdrawal rate, a portfolio can be severely depleted by sequence of returns risk, which involves experiencing large market downturns early in retirement.
• Inflation: Unexpectedly high inflation can reduce fixed withdrawals’ purchasing power.
• Personal circumstances: Spending requirements, medical expenses, and other financial commitments might differ significantly from person to person.

Therefore, even though it can be a useful starting point for discussions, depending solely on the 4% rule without taking specific circumstances and market dynamics into account can be a problematic strategy.

Beyond the 4% Rule: Exploring Sustainable Alternatives

Retirees should investigate more flexible and dynamic withdrawal strategies to manage the challenges of retirement income planning:

• Guardrails method: The 4% rule is expanded upon in this strategy by adding “guardrails,” or thresholds, that cause the withdrawal rate to change in response to portfolio performance. For example, a somewhat bigger withdrawal is allowed if the portfolio balance is substantially above a particular threshold. Conversely, withdrawals are curtailed to safeguard capital if the balance falls below a preset threshold.
• Variable percentage withdrawal (VPW): VPW entails determining the annual maximum sustainable withdrawal based on the retiree’s remaining life expectancy and the present balance of their portfolio. This method allows for larger withdrawals in years with robust market performance and requires smaller withdrawals during downturns.
• Time segmentation (bucket strategy): This strategy involves splitting retirement funds into several “buckets” according to risk tolerance and time horizon. Liquid assets for short-term income demands are kept in a short-term bucket; more cautious investments for the following 5 to 10 years are kept in a mid-term bucket; and growth-oriented assets are kept in a long-term bucket. To provide the longer-term assets the chance to grow and replace the shorter-term money, withdrawals are mostly made from the short-term bucket.
• Actuarial-based withdrawal strategies: By using mortality tables and actuarial science, these more advanced techniques calculate a withdrawal rate that is likely to endure throughout the retiree’s anticipated lifespan. These tactics can be customized by a financial professional to fit each person’s risk tolerance and life expectancy.

Integrating Tax Planning and Healthcare Costs

Now let’s take a look at the effects of taxes and medical costs on sustainable withdrawal strategies.

Proactive tax planning is crucial since taxes have the potential to drastically erode retirement income. Tax liabilities can be reduced with the use of strategies like Roth conversions, tax-efficient asset allocation, and careful management of required minimum distributions (RMDs).

Similarly, medical costs represent a significant and often unpredictable expense in retirement. Incorporating potential healthcare expenses into your withdrawal plan and exploring strategies like health savings accounts (HSAs) and long-term care insurance can help you feel confident that your retirement income can remain sustainable even despite health-related costs. 

Withdrawal Strategies That Offer Confidence

Running out of money in retirement is a real concern, but it doesn’t have to be your reality. With thoughtful planning and sustainable withdrawal strategies, you can feel confident that your savings will support the life you envision.

At Comprehensive Advisor, we’re dedicated to offering honest guidance and deeply personalized service. Helping clients navigate retirement with clarity and confidence is not just our job; it’s our passion.

Your goals come first, always. Email us at info@ComprehensiveAdvisor.com or call (760) 813-2125.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial strategies for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a comprehensive retirement roadmap to help ensure their assets are preserved and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory products and services made available through AE Wealth Management, LLC (AEWM), a Registered Investment Advisor. Insurance products are offered through the insurance business C.A. Financial & Insurance Services. Comprehensive Advisor, LLC is an Investment Advisory practice that offers products and services through AE Wealth Management LLC (AEWM), a Registered Investment Advisor. AEWM does not offer insurance products. The insurance products offered by C.A. Financial & Insurance Services are not subject to investment Advisor requirements. CA Ins. Lic. #6000262.  3075181 – 6/25