Rethinking the 4% Retirement Income Rule
The case for a more flexible and personalized approach to retirement income and portfolio management to live the life you earned.
Retiring with confidence and not outliving your savings takes more than hitting a savings number by a specific date – it takes a strategy. And in 2025, when some people are living well into their 80s and 90s, the stakes are higher than ever.
If you’ve saved up a six‑ or seven‑figure portfolio, the question becomes: how fast can you start spending it? And how do you avoid the two extremes—spending too much too early, or holding on so long that you’re too old to enjoy it?
Done right, retirement can feel like winning the lottery at 65. But taxes, timing, and market risk still matter. A few wrong moves early on, and you could be looking at part-time work in your 70s. At the end of the day, you can’t charge your retirement to a credit card.
A 30-Year Retirement Isn’t a Stretch Anymore
According to Social Security, a 65-year-old woman today has a 1-in-3 chance of living past age 90. For men, it’s 1-in-5. That’s not just a stat—it’s a serious risk factor. If you plan for 20 years of retirement and live 30 or 40, the math stops working.
That’s why longevity risk has become just as important as market risk. With advances in science, health care and medicine over the past couple of decades, the greatest accomplishment of mankind may be longevity in as much technology.
Most people worry about market crashes. But sequence of returns risk can do more damage—especially early in retirement. (See chart.) If you start drawing income during a bear market, you’re selling investments while they’re down and locking in losses. Even a conservative plan can unravel fast.
It’s not just how much you withdraw. It’s when you start pulling money that can make or break your long-term outcome.
What the 4% Retirement Income Rule Got Right—and What It Missed
The 4% rule was a solid starting point. Bill Bengen’s research showed that retirees who withdrew 4% in year one, then adjusted for inflation, rarely ran out of money over a 30-year retirement. But that model relied on steady market returns from a traditional 60/40 portfolio and assumed inflation would stay low.
That’s not today’s reality. With just a 3.4% inflation rate, your cost of living will rise 50% in 10 years and double in 20. For example, a couple targeting $80,000 a year retirement income at age 65 could need closer to $160,000 per year by age 85 just to maintain the same lifestyle. That’s a wake-up call.
This is why equities—not cash or CDs – are essential for long-term income. Stocks provide the growth engine needed to outpace inflation and taxes. Short-term instruments might feel safe, but they won’t pay the bills 10 or 20 years from now.
On top of that, most bond indices have been treading water. Since 2020, the Bloomberg Aggregate Bond Index has delivered negative real returns even with high yields, but is slowly reverting. The Fed’s historic rate hikes crushed longer duration bonds. And with market volatility and longer life expectancies, a fixed withdrawal rate from a static portfolio simply doesn’t cut it anymore.
Today, retirement income planning requires flexibility, diversification, and a clear strategy, not outdated rules from the 1990s.
Why Your Asset Mix Matters More Than Ever
Too many investors still cling to outdated rules like “invest your age in bonds” for their risk profile and asset allocation. But locking up the bulk of your portfolio in fixed income can be a silent killer. It may feel safe, but it risks falling behind inflation, taxes, and rising income needs.
A retiree in their 60s today could spend 30 years in retirement. You need real growth to make the plan work, not just income. That means holding enough in equities to keep pace with inflation and taxes, even if it comes with volatility. Most of our older clients are on board with this principal and are confident to not have the lions share of their nest egg under their mattress.
For our ultra-high-net-worth clients and in line with many family offices, we go beyond traditional portfolio models. In addition to globally diversified, fee-based strategies, we incorporate alternative sectors such as structured notes, private equity, and private credit. These vehicles help generate tax-efficient income, manage volatility, and lower exposure to public market swings.
Your allocation shouldn’t be based on age alone. It should reflect your time horizon, withdrawal plan, tax exposure, and risk tolerance. A purpose-built portfolio is the backbone of any sustainable retirement income strategy.
Flexibility Is the New Safe
The most successful retirees aren’t the ones who followed rigid rules—they’re the ones who adapted. This is where dynamic spending comes in.
Rather than withdrawing a flat percentage each year, dynamic strategies adjust based on portfolio performance, market conditions, and actual needs. You spend more when times are good. You rein it in when markets pull back.
We also encourage clients to use a bucket strategy—keeping 3 to 5 years of safe money set aside in cash or short-term instruments. This buffer helps avoid selling long-term growth assets during downturns and supports spending consistency without panic.
You Don’t Get to Pick the Market You Retire Into
If you start retirement in a bull market, your odds improve. If you start in a bear market, it’s harder. That’s sequence risk. And you can’t time it. Which is why building in flexibility matters so much more than picking a “magic” number.
Instead of treating the 4% rule as gospel, treat it as a benchmark. In 2025, a starting withdrawal closer to 3.5% to 4% may be more appropriate—especially if you’re aiming for a 30- to 40-year horizon.
Then adjust over time. Spending down a portfolio isn’t a straight line.
The Retirement Smile: Why Spending Isn’t Flat
Retirement spending doesn’t stay level. Early on, you travel, entertain, spoil the grandkids. By your mid-70s, spending often declines. Later in life, healthcare and long-term care costs kick it back up.
This pattern is known as the “retirement spending smile.” Understanding it helps you front-load your spending with confidence—knowing that your real costs will likely fall before rising again in your later years.
Most models that assume flat, inflation-adjusted spending cause people to underspend early and over-save late. That’s not a great outcome.
The Role of Taxes
Spending strategy and tax strategy go hand-in-hand. If you retire with a large balance in tax-deferred accounts like IRAs and 401(k)s, poor timing can lead to inflated taxes later on—especially when required minimum distributions (RMDs) begin at age 73.
We help clients smooth out their tax curve by:
-
Delaying Social Security until age 70
-
Drawing from IRAs or doing Roth conversions in low-tax years
-
Tapping brokerage accounts for capital gains control
Strategic withdrawals can save hundreds of thousands of dollars in taxes over retirement—and help portfolios last longer.
Don’t Be Too Conservative, Either
Here’s the flip side. Some retirees go into full preservation mode. They underspend, live frugally, and by the time they feel comfortable spending, they’re no longer able to enjoy it.
If you’ve done the work and built the right plan, don’t forget to live your life. Spend with intention. Fund the experiences you care about while you still can.
Money is a tool. Retirement is the reward.
So How Much Should You Spend?
There’s no single answer. But here’s a framework that works:
-
Start around 3.5% to 4% in year one
-
Adjust for market conditions and lifestyle
-
Hold 3–5 years of safe assets for stability
-
Stay invested for growth—not just income
-
Incorporate tax-smart withdrawal strategies
-
Use sophisticated tools if you’re in the UHNW camp
-
Revisit your plan annually—and adjust as life changes
The Bottom Line
There’s no perfect formula like the 4% Retirement Income Rule, but there is a right approach. One that combines flexibility, structure, discipline, and smart advice.
At Ulin & Co. Wealth Management, we help clients align their wealth with the life they want to live—not just protect it. Whether you’re planning for retirement or already living it, the key is to turn your nest egg into a purpose-driven income plan that grows with you.
Because the goal isn’t just to not run out of money. It’s to not run out of life.
If you’re ready to take control of your retirement plan and make sure it’s tailored to your unique goals and needs, we’re here to help. For more information or to schedule a complementary investment and retirement check-up, call us at (561) 210-7887 or email jon.ulin@ulinwealth.com.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that IFP Advisors, LLC, dba Independent Financial Partners (IFP), and it advisors believe to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as IFP does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
