Retirement Income Planner

How each strategy works

The 4% Rule

Developed by financial planner Bill Bengen in 1994, the 4% Rule says you withdraw 4% of your portfolio in year one, then increase that dollar amount by inflation each year. Historically, this approach has sustained a 30-year retirement in roughly 95% of rolling periods. The weakness: it ignores what the market actually does after you retire. You could be withdrawing aggressively into a declining portfolio.

Guardrails Strategy

The guardrails approach (based on Guyton-Klinger research) starts with a higher initial withdrawal rate—typically 5%—but adjusts dynamically. If your portfolio drops 20% from its starting value, you cut withdrawals by 10%. If it grows 20%, you give yourself a 10% raise. This creates a “spending corridor” that responds to actual market conditions, potentially lasting longer than a static approach while still allowing higher initial spending.

Bucket Strategy

The bucket strategy segments your portfolio by time horizon. Bucket 1 holds 2 years of spending in cash, providing a buffer against selling stocks in a downturn. Bucket 2 holds 5 years in bonds (earning roughly 4%), covering medium-term needs. Bucket 3 holds the remainder in equities (targeting 7%), which has time to recover from corrections. As you spend from Bucket 1, you periodically refill it from Bucket 2, and refill Bucket 2 from Bucket 3. The psychological advantage: you never sell stocks to pay this month’s bills.

Published by The Right Retirement Plan for educational purposes only. This planner uses simplified assumptions and does not account for taxes or market variability. This is not investment advice. Consult a qualified financial advisor for personalized retirement income planning.