Stop Obsessing About Your Safe Withdrawal Rate

The 4% rule matters less than you think in retirement

Confession time: I’m retired, I’m a Certified Financial Planner®, and I don’t even track my withdrawal rate.

And no, it’s not because I’m living off dividends alone, income from a second career, or a spouse’s wages. I’m actively drawing down and living primarily off my assets.

For the uninitiated, the concept of the Safe Withdrawal Rate (SWR) was introduced in 1994¹ by economist Bill Bengen. He found that a balanced portfolio with an initial 4% withdrawal rate, adjusted upward each year for inflation, would last at least 30 years in any historical market cycle².

And The 4% Rule was born.

Researchers and internet money nerds have debated and adjusted the rule endlessly since then. What about using different asset allocations, longer time horizons, adjusting it up or down in extreme market cycles, or making spending dynamic?

Advice now ranges anywhere from 2.8% to 5.5%³ for an initial SWR. Every retirement calculator is essentially trying to nail it down, and much of the financial planning discourse centers around how to maximize it.

My cavalier attitude about it boils down to two things:

1. I know from experience that I can work hard, earn money, and be content spending very little if I have to.

2. So far, I don’t have to.

It feels like it should be anathema to disregard such a widely accepted retirement principle, but I’ve known very few people who actually stick to a retirement spending plan long term - including most of the clients who paid me to create one for them.

Most wealthy retirees either overconfidently blow through their assets⁴ (rare) or cautiously refuse to touch the principal (typical).

Financial professionals and FIRE personalities who lead the SWR debates and build complex models to analyze them to the third decimal place are usually so enamored with achievement that they never stop earning anyway (hi, it’s me, teetering precipitously toward this category).

To say nothing of, you know, regular people. Did you know that most retirees manage to live and die happily without ever even hearing the words “Roth conversion” or “IRMAA?” Many of them can’t even tell you their tax bracket!!

To be perfectly honest - and I probably shouldn’t admit this - I am not even fully certain how to calculate my withdrawal rate. Like many retirees, my income streams are varied, my expenses are lumpy, and some of the assets that will support me aren’t liquid.

• Is a real estate syndication distribution income or a capital reduction?

• Is a rental mortgage principal payment an expense or equity contribution?

• How do you factor in an anticipated inheritance?

• Are regular gifts true income?

• Are taxes paid on an optional Roth conversion true expense?

And how often should I update the calculations - once on the day I retire and never again, as is the method in most retirement research? Once a decade? Whenever my portfolio shrinks or grows by a certain margin?

I could spend dozens of hours a year running the numbers from various angles, comparing outputs on retirement calculators and debating best practices on financial forums and with AI. These activities once bordered on a full-fledged hobby.

But honestly, now that I’ve pulled the trigger and let the retirement genie out of the bottle, I really can’t be bothered.

Maybe my confidence is just a side effect of the ongoing bull market that is sure to put me in my place eventually. Or maybe normal levels of prudence feel a little reckless now that I’m not seeking reassurance from my spreadsheets as a distraction from my stressful 9-5.

Whatever the reason, my experience is not uncommon. I’ve worked with hundreds of retirees and spent thousands of hours on financial forums; even anxious optimizers get used to the new status quo after 18-30 months and realize they don’t need to obsess about the numbers anymore.⁵

Across all walks of life and asset levels, retirees seem to end up in suspiciously similar, generally comfortable circumstances. Cash flows in, bills get paid, account balances fluctuate but mostly trend up and to the right.

The system rolls on with time, sometimes smoothly and occasionally with fits and starts.

Years of financial (over)analysis are a major reason I’m now comfortable winging it. I’ve been running numbers long enough to be able to skim a financial statement and visualize the Monte Carlo simulation it would generate - and long enough to notice that the projections never go as planned.

It’s gotten to the point that the planning exercise itself has started to feel suspect - or at least kind of boring. This may make you feel liberated or despondent, but here are a few reasons the 4% rule isn’t as relevant as we’d like it to be.

You’re flexible.

You’ll reduce spending if you need to. You’ll work more if you have to. It’s really not that complicated.

Worst case you’ll live too long, sell the house, stop traveling, and your kids won’t inherit much. There are worse fates.

Most people manage spending in retirement intuitively just like they do while working, but even those with detailed budgets reflexively cut spending when the market is down and splurge when it soars.

In my experience this happens regardless of net worth level, equity exposure, or what your plan says you can afford.

“Dynamic guardrails” have emerged as the latest withdrawal rate iteration which attempts to formalize this flexibility. In simple terms, you increase spending when the market is up and freeze or lower it when it’s down. This works best for people with some discretionary cushion in their budgets.

The hard and fast 4% rule has been stretched and expanded continually over time. It’s no longer a static “rate” so much as a complex withdrawal system that…is pretty close to what most people without a spreadsheet fixation end up doing on their own (and what people did forever before the SWR was invented).

You’re conservative.

If you even know what a safe withdrawal rate is, you’re probably on track to die a millionaire. These rules are conservative by design, as are the people who cling to them.

The SWR can safely withstand the worst market cycles in history, which means 90%+ of the time, it’s too conservative. The vast majority of people who stick to it (which is approximately nobody, but go with me) see their portfolios grow over time even as they live off them.

The SWR assumes retirees increase spending each year with inflation, but most people’s personal inflation rate is lower than the official rate,⁶ and research shows retirees actually spend less as they age after an initial surge - even after accounting for increased healthcare costs in later years⁷.

Despite the rule being inherently conservative though, you’re probably too conservative to follow it!

You’ll add a 3 year cash cushion and a 7 year bond ladder. Discount any part-time earnings, social security, or inheritance. Hit your number even with all that cushion but keep deciding to work one more year anyway, just in case.

Retirees are incredibly sensitive to downside risk and are quick to cut discretionary spending in anticipation of a potential problem. They are far less likely to adjust spending upward when everything goes better than expected.

Even once you’re well into retirement flush with cash, calamities averted, you won’t be able to stomach the idea of paying a little income tax to sell brokerage assets or tap your IRAs until the dreaded RMDs force you to.

In short you’ll probably work too long, spend too little, and do your damndest to limit portfolio withdrawals to taxable dividends, interest, and non-elective capital gains distributions, no matter what any calculator tells you⁸.

You don’t know anything (sorry).

You can’t predict anything, no matter how hard you try. Step away from the Monte Carlo simulator. You’re driving yourself - and most probably your spouse - mad while generating dramatically diminishing returns on your obsession.

Stock market returns, inflation, bond yields, and the date of your death are just a few critical variables you can’t predict with any level of accuracy.

You don’t know whether you’ll end up divorced or (re)married, what kind of help your kids might need, how your health will evolve, or what future inventions may become standard expenses. To say nothing of world wars and global recessions.

So what do we do in the face of all this uncertainty? Why add another line to the spreadsheet of course. And keep grinding until the plan can endure multiple concurrent and ongoing crises.

If you stare at the screen long enough you can convince your lying self that a SWR of 3.75% is definitely going to work much better than 3.9% and that you are in total control of that swimming page of digits - and by extension your life.

You’re not that precious.

We all need a whole lot less than we think. Could you truly not survive with a paid off house and a social security check? Most people make do on a whole lot less.

I realized during Covid lockdowns how little I really need. Many of my regular expenses disappeared overnight: restaurants, pedicures, travel, clothes. Not only was I content, I was genuinely surprised to find that I thrived.

I was still busy at work financing all those covid home purchases, but I had long stretches of solitude free to read, draw, cook, and walk. I lost 15 pounds, spent nearly nothing, and was happier and more relaxed than I’d been in years.

Time affluence was what I’d been missing; money was what I was using to try to make up for it. That was the turning point where I stopped focusing on accumulating spending capacity and started considering how soon I could buy freedom instead.

I think this is a big part of why many older retirees spend relatively little and live simple lives, even when they have piles of money.

I still love a nice extravagant purchase, but I cherish the gift of knowledge that if my retirement budget needs to shrink, I can be happy at home surrounded by my books, plants, and pets.

You are that special.

Life cannot be contained in a mathematical formula. There are no real rules. We are making all this shit up.

Build security, of course, but don’t waste too much time in the virtual reality of financial models or burning yourself out in a job that’s good for your net worth but bad for your health, relationships, and soul.

Live a little while you still can. If WWIII blows your plan to smithereens, you’ll probably be glad you had a little fun and made some memories before society collapsed.

Some people embrace a YOLO mentality without any qualms, but others of us sacrifice too many years fretting and planning, ensuring a struggle today just in case of a struggle tomorrow.

I’m all for responsible self-sufficiency, but at some point that tradeoff no longer makes sense.

At some point it’s time to throw caution to the wind, trust yourself and your ability to adapt, and focus on what makes you come alive.

1. It’s pretty wild that this wasn’t even a thing until about 30 years ago, and it wasn’t a mainstream concept until the 2010s with the explosion of the online FIRE community.

2. His initial research can be found here.

3. Dave Ramsey has always flouted the standard advice, mocking “nerds in their mother’s basement” for their spreadsheets and telling listeners to withdraw 7-8% since the stock market returns 10-12%. He’s been scorned for this for years, though ironically the research keeps inching closer to his spitball (and to the chagrin of haters everywhere, in practice his advice has worked for decades).

4. Typically these are entrepreneurs who assume they can always start and sell another business, true believers counting on their investment(s) to go big, or they are banking on a large inheritance or dying young

5. Of course some retirement plans fail; some retirees go back to work out of boredom, need, or existential malaise. But whether you’re flush with cash or on a very tight budget, people tend to adapt to their circumstances, and playing with the numbers becomes redundant.

6. This is especially true if you own a home since rent increases drive a large portion of the official inflation rate.

7. I’m too jet lagged to cite sources for every stat I’m throwing at you, but this is common industry knowledge with research to back it up. Google at your pleasure.

8. This is one good argument for actively managed mutual funds (which distribute capital gains) as well as high dividend funds. Both may underperform index funds, but if they boost your cash flow and allow you to enjoy more of your wealth in retirement it may be worth it.

---

I help people get organized and use wealth to design a life that feels secure and aligned. A former Wall Street banker and CERTIFIED FINANCIAL PLANNER™, I act as an unbiased advocate without selling products or managing investments directly. To learn more, visit my website.

---

DISCLAIMER: I love writing about the personal, emotional, and practical sides of money, but please remember that my Substack is strictly for educational and coaching purposes. The insights shared here are general in nature and do not constitute specific investment, tax, or legal advice. While I am a CFP® certificant, reading this does not create an official advisory relationship, and any comments or likes should not be interpreted as client testimonials. For personalized investment advice, please consult a registered financial professional.