Choosing a Retirement Withdrawal Strategy for Return on Your Life (ROL)
Have you thought about what type of retirement withdrawal strategy fits your life, not just your portfolio? The right approach balances enjoying your wealth now with making sure your nest egg lasts. Many retirees default to a number—4%—but as longevity and markets evolve, so should your retirement withdrawal strategy.
As a CPA, CFA charterholder, and Registered Life Planner®, I pair tax-smart planning with life-centered questions to help your withdrawals fund what matters most.
Quick diagnostic: Try our 3-minute TEAM Scorecard (Time, Energy, Attention, Money). It highlights which form of capital is most scarce right now—to help pick a retirement withdrawal strategy that protects it. [Try our TEAM Scorecard]
How to Choose a Retirement Withdrawal Strategy (ROL First)
Below are three common approaches I evaluate with clients. Each can help—but none is complete without an ROL context, taxes, and flexibility.
The 4% Rule
When it’s useful: A simple starting point to sanity-check a plan and translate a portfolio into a rough “paycheck,” then customize it for your life.
Watch out: It ignores ROL priorities and taxes—formulaic raises can push you into higher tax brackets or leave you underspending on what matters now.
In 1994, financial advisor William Bengen analyzed market history and tested various withdrawal rates from a typical stock/bond portfolio. Bengen concluded that withdrawing 4% in year one and adjusting for inflation thereafter would have kept most retirees from running out of money over most 30-year periods, even as the economy experienced significant ups and downs from year to year. Many advisors and soon-to-be retirees still use the 4% Rule as a starting point to test a retirement income plan. More recently, Bengen has suggested a higher starting rate may be sustainable with broader diversification. However, results may vary.
While the simplicity of a single number and a steady, predictable withdrawal rate is appealing, a typical retirement isn’t static. As your needs and goals change—along with markets—over the decades ahead, so should your plan.
The fix: Use the 4% Rule for rough math, not a rigid rule. Your retirement withdrawal strategy shouldn’t be static either.
Establishing Guardrails
When it’s useful: A behavior-friendly way to adjust spending with markets while keeping your lifestyle broadly steady.
Watch out: Without tax coordination (tax brackets and rates, Roth conversions, Qualified Charitable Distribution (QCD) timing), raises/cuts can cause bracket creep or unnecessary constraint.
Guardrails adapt spending to markets and can help with sequence-of-returns risk. But automatic increases/decreases can create tax bracket creep in strong years or pinch lifestyle in weak years. I often blend guardrails with proactive tax moves (Roth conversions, QCDs) so behavior and brackets work together.
In 2006, financial planner Jonathan Guyton and Professor William Klinger proposed five triggers to adjust retirement withdrawal rates:
- Initial withdrawal rate:2%-5.6% for many retirees (inflation-adjusted annually).
- Upper guardrail: If your portfolio is up and your effective withdrawal rate falls 20% below your initial rate, you increase withdrawals by 10%.
- Lower guardrail: If your portfolio is down and your withdrawal rate rises 20% above your initial rate, you decrease withdrawals by 10%.
- Inflation adjustments: Cap inflation-based raises at 6% in high-inflation years.
- Longevity: Consider loosening the lower guardrail if your projected life expectancy is under ~15 years—spend in line with purpose.
Guardrails are more proactive than a static percentage, but they still aim to keep a relatively flat income path. Without tax coordination, they can trigger avoidable taxes in “up” years and unnecessary constraints in “down” years.
The fix: integrate guardrails with tax planning so raises/cuts don’t cause bracket creep or lifestyle whiplash.
The Bucket Strategy
When it’s useful: Converts volatility into calendar time—cash/bond buckets fund today while equities recover, aligning with energy/health seasons.
Watch out: Buckets can become cash-heavy and tax-inefficient if not periodically rebalanced and refilled with a plan for RMDs and capital gains.
Another retirement withdrawal strategy focuses on time instead of market moves by segmenting assets by when you’ll need them.
One common structure:
- Early Retirement: Cash, pension income, withdrawals from taxable brokerage accounts.
- Middle Retirement: Withdrawals from tax-deferred traditional IRAs and 401(k)s.
- Late Retirement: Withdrawals from a tax-exempt Roth IRA and claiming full Social Security benefits.
Retirees might also create buckets for specific needs and goals, such as relocating, travel, or paying for long-term medical care later in retirement.
A practical tweak I like: hold up to two years of spending in cash or near-cash securities, with bonds as a secondary buffer. Buckets translate volatility into calendar time, helping you avoid selling stocks at low prices. We then replenish during recoveries—aligning withdrawals with your energy, health, and plans in each season of retirement.
Why Q4 Matters for Your Retirement Withdrawal Strategy
Q4 is prime time for tax-aware withdrawals: Roth conversions, required minimum distribution (RMD) timing, and QCDs. If you’re charitable and haven’t taken your full RMD, a QCD can allow you to take your RMD while also making your donations more tax-efficient. This strategy can preserve deductions, credits, and Income-Related Monthly Adjustment Amount (IRMAA) thresholds. (See our blog: The Social Security Tax Torpedo: Could It Happen to You for more information about IRMAA.)
At Apprise, we meet with most clients in the fourth quarter to discuss tax planning strategies. Our work includes reviewing income, deciding if Roth conversions make sense this year, and—if so—how much to convert. (See How Roth Conversions Can Benefit You, Your Surviving Spouse, and Your Heirs to learn more about some of the benefits provided by Roth conversions.) Roth conversions can also help you to avoid the Widow’s Penalty.
For those who are charitably inclined, QCDs may further improve after-tax outcomes. When you make a QCD, you do not include the amount given directly to a charity as a QCD in your income. While you don’t get a deduction for the amount either, not including it in your income provides greater value. (See this Tuesday Tip for more information, including the 2025 QCD limits.)
Tax planning strategies connect your retirement withdrawal strategies to your life choices.
| TEAM → Tactics Time: automate RMD/QCD steps Energy: consolidate to one “retirement paycheck” Attention: clear when/then guardrail rules Money: tax bracket bands + Roth conversion targets [See your TEAM profile] |
FAQs for Your Retirement Withdrawal Strategy
Q: What is the best retirement withdrawal strategy for most people?
A: There isn’t a universal “best.” I blend guardrails, a two-year cash bucket, and tax planning (Roth conversions, RMD/QCD timing) so withdrawals fit your life and taxes—your Return on Your Life comes first.
Q: Should I always withdraw from taxable accounts before IRAs/Roths?
A: Often that’s a starting point, but bracket management changes the order. In some years, we’ll convert to Roth, harvest gains, or use QCDs to keep income—and Medicare premiums—lower.
Q: How do market downturns affect my retirement withdrawal strategy?
A: We spend from cash/bonds first, use guardrails to pause raises, and refill buckets after recoveries—so you avoid selling stocks low and keep your plan on track.
Build Your Return on Your Life Withdrawal Plan
Somewhere in this mix of percentages, guardrails, buckets, conventional wisdom, market history, and rules of thumb is a personal, adaptable retirement withdrawal strategy that can help you to live your dream retirement for decades to come.
Schedule a quick withdrawal checkup call. We can identify your next 3-5 “big rocks” and align withdrawals, taxes, and timelines.
Not sure which bucket/guardrail mix fits your TEAM? Start with our Scorecard, and we’ll tailor from there. [Use our TEAM Scorecard]
This Week’s Favorite Reads:
This week’s Five Favorite Reads offers tips on gray divorce, deleting yourself from the internet, and home renovations that those who prefer to age in place may want to consider. You’ll also find an article about navigating change. On the lighter side, you’ll find one that explains why your dog prefers yellow bowls—and toys—over red.
Here are the links to this week’s articles, as well as a brief description of each and why you should check it out:
1. Gray Divorce Can Throw Your Retirement a Curveball: What to Know.
The incidence of gray divorce (divorce in or near retirement) is on the rise. It can also upend a well-built plan.
Costs rise when one household becomes two. You must divide assets, and there’s little time to rebuild, which raises the risk of depleting savings. Key mechanics: retirement accounts are often marital property; dividing 401(k)/pension assets typically requires a Qualified Domestic Relations Order (QDRO), while you split IRAs by transfers (don’t forget to consider tax consequences). You don’t split Social Security benefits, but if applicable, an ex-spouse may claim a spousal benefit if the marriage lasted 10+ years. Many find they must delay retirement and add risk-management guardrails. Practical prep: document assets as mine/yours/ours, understand state rules, and coordinate legal and tax. For clients going through “new beginnings,” early planning can protect income, housing, and flexibility through the transition. If you are contemplating divorce, you can also download our free divorce preparation guide.
2. Go Delete Yourself From the Internet. Seriously, Here’s How and Delete Yourself, Part 2: Your Personal Data on the Dark Web.
Many of us do not realize how much others can learn about us by searching online. Read these articles for some suggestions about what you can do to remove at least some of this data. Data about you is widely available via people-search sites and leak dumps. Start by using Google’s Results About You and dark-web monitoring to surface exposed info; also, check Apple Passwords (Compromised Passwords), Have I Been Pwned, and alerts from password managers. People-search profiles pull from public records and social media; opt out directly (time-consuming) or hire services like DeleteMe, Optery, or broader suites like Aura. Expect to repeat removals—data reappears when brokers refresh. As I found out when taking some of these steps, the data these brokers have about you may also have errors.
If you’re exposed, focus on damage control:
- Freeze credit at Experian, Equifax, TransUnion (and consider ChexSystems, NCTUE).
- Change reused passwords and adopt a password manager.
- Turn on multifactor authentication (prefer app-based).
- Preempt fraud: create SSA and IRS accounts and get an IRS IP PIN.
- Minimize future data exposure: use burner email/phone numbers, avoid sharing SSNs, and be cautious with driver’s license images.
3. Home Renovations to Safely Age in Place.
Most clients say their financial plan should support aging in place—aka, keeping the home they’re in (and loving) safe and usable. This piece is a friendly nudge to start before a stumble forces the issue. Think simple, practical upgrades: swap tubs for zero-threshold showers with handheld heads, add grab bars (with proper backing), choose non-slip floors, brighten rooms with layered lighting, and make doors/halls roomier (≈34″ doors, 42″ halls). Little quality-of-life tweaks help too: lever handles, lower switches/raised outlets, smoother thresholds (≤½”), and right-height appliances. Add a dash of smart tech—voice assistants for check-ins, reminders, and alerts. Prevent the fall, keep the freedom—that’s the vibe. If you plan to age in place, make sure your financial plan includes funds to cover the cost of these changes. You also want to keep in mind that if you ultimately must move, the cost of such changes can increase your cost basis in your home. Talk to your CPA about credits/rebates for accessibility upgrades, if applicable in your state. You can also check this article for some Home Improvements Tax Tips.
4. What’s Your Dog’s Favorite Color?
Like me, many of my clients are proud dog parents, so this one made me smile. Dogs don’t see the whole rainbow—we’re talking yellows, blues, and grays—and a new study found they strongly prefer yellow. In tests with 458 free-roaming dogs, most bee-lined to the yellow bowl, even when a gray bowl had a chicken treat (they went to the yellow one first, then doubled back for the snack!). The takeaway: that bright red toy you toss on green grass may disappear to your pup’s eyes. If you want easier fetches—and fewer lost toys—pick yellow (or blue) gear. Consider it a tiny, joyful quality-of-life upgrade.
5. Why Change Is Hard and How to Navigate It.
I usually don’t share articles from industry publications, but this one discussing William Bridges’ idea that change is external while transition is internal seemed appropriate. It names the quiet losses we feel—identity, familiarity, control, structure, attachments, even a sense of future—and offers four simple moves to get unstuck: Restore, Replace, Redesign, Relinquish. Gentle, practical, very human—and highly relevant for new beginnings like widowhood, divorce, or an empty nest. Those going through life transitions often take time to realize “Even positive change can’t be fully embraced until you acknowledge what you’re leaving behind.” If you’re navigating a transition, don’t hesitate to get in touch with us, as our life planning process can help you flourish through life’s big changes.
Our practice continues to grow through introductions from our clients and friends. Thank you for your trust.
If you would like to discuss financial topics, including navigating new beginnings, managing your investments, creating a life plan, or saving for retirement, please schedule a call or a Zoom virtual meeting. We will be in touch.
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