A few months ago, Lisa M., a longtime listener in Chicago, sent me an email that captures something many retirement savers wrestle with. 

She wrote:

“Taylor, my husband and I have done everything right. We saved, we invested, we kept our expenses under control. But now that we’re retired, we’re struggling to actually spend the money. Every time we book a trip, write a big check, or think about helping our kids out, there’s this nagging voice asking: can we really afford to do this? What if we overspend and run out?” 

Lisa and her husband are not alone. In fact, there is no shortage of research showing that many retirees spend far less than they likely could. In one study, married retirees aged 65 and older with at least $100,000 in financial assets withdrew just 2.1% of their savings per year on average. 

Another study found that higher-net-worth retirees who entered retirement with at least $500,000 had spent less than 12% of their savings nearly 20 years later—and more than a third had actually grown their wealth. 

In other words, the dominant fear in retirement is running out of money—which is valid—but for many people, the bigger risk may be underspending. And that’s exactly what inspired today’s episode.

A recent research report examined nine different retirement withdrawal strategies, and the findings suggest that many retirees may be able to start retirement with meaningfully higher withdrawal rates than the traditional 4% rule implies. 

So, today, I’m going to break it all down. I’m going to walk you through the five strategies that stood out, exactly how they work, the trade-offs involved, and what they teach us about building a smarter retirement income plan. I’m also sharing the three levers you can pull to safely push your starting withdrawal rate to as high as 6.5%.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you “stay wealthy” in retirement. Ok, onto today’s episode.

5 Withdrawal Strategies to Boost Retirement Income (And How High You Can Really Go)

Before we get into the five strategies for boosting retirement income, let me set the stage with a little context and refresh all of our listeners on why this research matters so much. 

The traditional 4% rule, originally developed by financial planner Bill Bengen back in the early 1990s, works like this. You take 4% of your portfolio in year one of retirement, adjust that dollar amount for inflation each year, and if history is any guide, your money should last at least 30 years. 

It’s simple. It’s easy to implement. And for a long time, it was considered the gold standard for retirees. 

But here’s what’s interesting. Even the creator of the rule—Bill Bengen himself—doesn’t follow it as rigidly as many people think. In fact, Bengen has said he personally uses closer to a 5% withdrawal rate for his own portfolio. And in many interviews, he’s emphasized that the original research was built around a worst-case scenario: someone retiring at the worst possible moment he could find in modern market history, October of 1968. As my good friend Michael Kitces has pointed out in his research, the 4% rule is more likely to quintuple your wealth than to deplete it.

So think about that for a second in the context of what we discussed earlier. The research shows many retirees are withdrawing around 2% of their savings. The creator of the 4% rule uses closer to 5% himself. And historically, the rule is more likely to leave you with far more money than you started with.

While the underspending problem in retirement is very much alive and real, the core limitation of the 4% rule is that it doesn’t adapt. It assumes you withdraw the same inflation-adjusted amount every single year regardless of what the market does.

Your portfolio drops 30%? You take the same dollar amount. Your portfolio doubles? You still take the same dollar amount. But retirement rarely plays out that neatly—it requires adaptation.

As Amy Arnott from Morningstar recently highlighted in her recent research, the rigidity of this approach is exactly why it produces a lower starting withdrawal rate. The 4% rule has to be conservative because it doesn’t have any built-in features to help course correct. 

Now, I want to be clear here. I’m not saying the 4% rule is bad or that it should be avoided. As I’ve said on this show before, it can be a great starting point for the retirement income conversation. But that’s exactly what it is, a starting point. And there’s no shortage of research out there that shows us what becomes possible when you move beyond that starting point and introduce flexibility into the equation.

The 5 Withdrawal Strategies

To understand the withdrawal strategies Morningstar tested, it helps to first look at how they ran their analysis.

In short, they built a series of simulations using forward-looking return assumptions for a portfolio made up of 40% stocks and 60% bonds.

They then ran 1,000 different hypothetical return patterns across a 30-year time period. Think of it as testing how a retirement plan might hold up across 1,000 different possible futures—some with strong markets, some with weak markets, and everything in between.

For each strategy they tested, the researchers asked a simple question:

What’s the highest withdrawal rate someone could start with and still end retirement with money left over in at least 90% of those scenarios?

In other words, they weren’t looking for a strategy that ONLY works in perfect conditions. They were looking for one that holds up most of the time, even when markets don’t cooperate.

Using this framework, the traditional fixed withdrawal approach—Morningstar’s “base case”—produced a safe starting withdrawal rate of almost exactly 4%.

But five of the nine withdrawal strategies they tested meaningfully beat that number. And they all have one thing in common: instead of locking spending into a fixed rule, they introduce some level of flexibility into the retirement income plan. 

Let’s walk through each one.

1) The first strategy examined is commonly referred to as the Constant Percentage Method, and this method produced a starting safe withdrawal rate of 5.7%.

This approach is about as simple as it gets. Instead of withdrawing the same fixed dollar amount each year based on your portfolio value on day one of retirement (like the 4% rule mandates), you simply withdraw the same percentage of your portfolio balance each year.

So if you use the 5.7% safe withdrawal rate from Morningstar’s research and your portfolio is worth $1 million in year one, you would withdraw $57,000. If the portfolio drops to $980,000 the next year, you withdraw 5.7% of that new balance, or about $55,900.

The benefit of this approach is that it’s self-correcting. When markets are down, your withdrawal also goes down and spending naturally adjusts. When markets are up, your withdrawal amount goes up and you can spend more. And because you’re always withdrawing a percentage of the remaining balance, the portfolio can’t be fully depleted. 

The trade-off with this method is that income can swing quite a bit from year to year. To soften those swings—which can be difficult for retirees who need consistent income—the researchers applied a spending floor so withdrawals in any year don’t drop below 90% of the initial withdrawal amount. Even with that floor, the portfolio still ended with a positive balance in at least 90% of the 1,000 scenarios they tested over the 30-year period.

One final note before we move on to number two: the Constant Percentage Method does not include an inflation adjustment. Your spending only goes up when your portfolio goes up. And if a good year in the market is followed by a weaker one, that bump in spending may only be temporary. So, keep that in mind if this is the methodology you or your advisor ultimately consider implementing.

2) Ok, the second withdrawal strategy studied is known as the Endowment method, which also happened to support a 5.7% starting withdrawal rate under the same parameters. 

As the name suggests, this approach borrows from how university endowments manage their spending. But instead of applying the 5.7% withdrawal rate to the portfolio’s current value each year—like the Constant Percentage Method—this strategy bases withdrawals on an average portfolio value over time, which is intended to help smooth out the year-to-year swings in spending.

In the research, Amy and her team used a 10-year rolling average, an approach recommended by the well-known author, consultant, and academic, Charley Ellis. 

But here’s where it gets a little more complex and requires some ongoing maintenance. Early in retirement, when there isn’t yet a long history of portfolio values to average, withdrawals are based on the prior year’s ending balance. Each year after that, another year of data gets added to the calculation, slowly building the average over time. By year ten, withdrawals are calculated using the average portfolio value from the previous 10 years.

The longer term result is a much smoother spending path,largley because withdrawals aren’t tied entirely to whatever the portfolio happened to do in the most recent year. That said, this approach still shares some of the same limitations as the Constant Percentage method—namely income variability and no automatic inflation adjustment.

However, the averaging effect does help soften spending cuts during market downturns. And just like the Constant Percentage method, the researchers applied the same 90% spending floor, preventing withdrawals from falling below 90% of the previous year’s amount.

3) Ok, moving onto the third strategy, which is the one I was personally most interested to see show up in this study because it aligns closely with what we use with our clients. This is the Guardrails method, which was originally developed by financial planner Jonathan Guyton and computer scientist William Klinger.

Now, I’ve talked about the Guyton-Klinger guardrails a number of times on the show before, but for those who are new—or need a refresher—let me briefly summarize how it works and then share what Amy’s research found. 

The approach was first introduced in a paper Guyton published in 2004 and later refined with Klinger in 2006. At its core, it was designed around four primary goals most retirees care about: 

1. maximizing income, especially early in retirement; 
2. avoiding the risk of running out of money; 
3. limiting disruptive income changes; 
4. and maintaining purchasing power by adjusting for inflation. 

To implement this strategy, you begin by setting an initial withdrawal percentage based on your portfolio allocation and time horizon. Each year, withdrawals can increase with inflation if certain rules are met—but the guardrails serve as boundaries, triggering pay raises when the portfolio performs well and temporary pay cuts when it doesn’t. 

Here’s how those boundaries work. If your portfolio performs well and your withdrawal rate falls more than 20% below your starting rate, the prosperity rule triggers and you receive a 10% pay raise from your portfolio. In other words, your investments have grown enough relative to what you’re withdrawing that the system signals it’s safe to spend a little more. 

On the flip side, if markets decline and your withdrawal rate rises more than 20% above your starting rate, the capital preservation rule triggers and you take a 10% pay cut—not a drastic one, just enough to keep the plan sustainable. 

Let me put some numbers to this. Suppose you start retirement with $1 million and determine a 5.2% starting withdrawal rate is appropriate based on Morningstar’s research. In year one, you would withdraw $52,000 (that’s 5.2% multiplied by one million dollars). Now, if your portfolio performs well and it grows to, let’s say, $1.3 million, that same $52,000 withdrawal would now represent about 4% of the portfolio—more than 20% below your starting withdrawal rate of 5.2%. 

This would trigger the prosperity rule and increase your withdrawal amount by 10%, bringing it up to $57,200.

Now let’s flip it around. If markets decline and your one-million-dollar portfolio falls to $800,000, that same $52,000 withdrawal would equal roughly 6.5% of the portfolio balance—more than 20% above your starting withdrawal rate. This would trigger the capital preservation rule, reducing the withdrawal by 10% to about $46,800. It’s a meaningful adjustment, but it’s important to point out that you’re still withdrawing more than the traditional 4% rule—and more importantly, you’ve helped protect the long-term sustainability of your plan. 

The beauty of this approach is that it effectively creates a spending range—a set of guardrails your withdrawals stay within. And to really simplify it, each year, only one of four things can happen: 

1. First, if the previous year’s returns were negative, you skip the inflation adjustment and keep spending the same. 
2. Second, if returns were positive and the withdrawal rate is still within the guardrails, you adjust for inflation.
3. Third, if the withdrawal rate drifts too high, you take a modest cut. 
4. And potential outcome number four: if the withdrawal rate drifts too low, you get a pay raise. 

As Amy confirms in her research, this approach supports a 5.2% starting safe withdrawal rate—meaningfully higher than the traditional 4% rule.

And stick with me here, because later in this episode, I’ll explain how adjusting three key levers can push that number even higher, giving you even more control over your spending plan.

But, ultimately, what I love about the Guardrails method—and why we use it with clients—is that it gives retirees the confidence to spend more when markets cooperate while automatically dialing things back when they don’t. It’s disciplined, rules-based, and removes much of the emotional decision-making that tends to trip people up. 

And here’s what really stood out in the research: the guardrails approach didn’t just allow for a higher starting withdrawal rate. For someone retiring with a $1 million portfolio, it produced about $1.36 million in total lifetime spending over 30 years—meaningfully more than the traditional fixed approach—while the median ending portfolio balance was still around $700,000.

In other words, retirees were able to spend more along the way while still finishing retirement with significant assets remaining in many scenarios. That’s the benefit of flexibility: spending rises when markets cooperate and guides you to pull back slightly when they don’t. And if your goal is to die with close to zero, the results also highlight one of the downsides, leaving more money behind than intended. 

4) Ok, let’s move onto the fourth withdrawal strategy, which builds directly on the guardrails concept. Amy calls this one “Probability-Based Guardrails”, and in the study, it supported a 5.1% starting withdrawal rate, slightly lower than the standard guardrails approach.

Here’s how it works. Instead of relying only on withdrawal percentages to trigger raises or cuts, this method takes things a step further by recalculating the probability of success each year. In other words, you’re essentially rerunning your retirement plan annually to see how sustainable it still looks based on updated market performance. 

If strong markets push the probability of success up to 95% or higher, spending increases by 10%. If a rough stretch drags the probability down to 75% or lower, spending gets reduced by 10%. 

To keep spending from drifting too high after a long run of strong markets, the researchers also placed a cap on withdrawals at 120% of the initial inflation-adjusted amount. And the results here were pretty striking. As Amy highlights, this method produced the highest total lifetime spending of any strategy tested—about $1.55 million over the 30-year period on a starting portfolio balance of $1 million. But there’s a trade-off. It also left the smallest median ending portfolio balance, at just $230,000. So if leaving a significant legacy is an important goal, this approach may not be the best fit. 

5) Ok, before I explain how retirees can push their withdrawal rate even higher than what we’ve discussed so far, let’s quickly look at the fifth and final strategy: the Vanguard Floor and Ceiling method.

This is essentially another variation of the guardrails concept and, just like the previous strategy, it supports a 5.1% starting withdrawal rate. 

The process starts the same way as the others: you set an initial withdrawal percentage and adjust it each year for inflation. But then a second step kicks in, which changes things slightly. Your new withdrawal amount must stay within a tight band relative to the prior year’s withdrawal. Specifically, it can increase by no more than 5% or decrease by no more than 2.5%. 

The goal here is to avoid two common retirement mistakes: 1) spending too aggressively after a market decline, or 2) becoming overly conservative after a long stretch of strong returns. And here’s how it works in practice. 

In the research example, a retiree named Elaine begins by withdrawing 5.1% of her $1 million portfolio, or $51,000. At the start of year two, that amount first gets adjusted for inflation. If inflation was 2.5%, her inflation-adjusted withdrawal would be $52,275. From there, the guardrails are applied. The ceiling allows the withdrawal to increase by no more than 5%, which would bring the maximum to about $55,000. The floor allows it to decrease by no more than 2.5%, which would set the minimum to slightly more than $50,000. 

Now suppose Elaine’s portfolio finished the year at $1,050,000. A 5.1% withdrawal from that balance would equal about $53,500. And because that number successfully falls between the floor and the ceiling, it becomes the withdrawal amount for the following year.

As noted in the research, this approach fine-tunes withdrawals so retirees don’t spend too aggressively when markets are down while still allowing spending to rise modestly when markets cooperate. In essence, it’s a more tightly controlled version of the guardrails framework. And due to its more conservative design, it finished with a higher median ending balance—about $880,000 versus $700,000 for the traditional Guardrails method.

Three Key Takeaways

So those are the five withdrawal strategies that stood out in Amy’s research. And as we wrap up, I want to highlight three key takeaways for retirement savers, and then we’ll quickly look at how you can safely push starting withdrawal rates to as high as 6.5%. 

The first takeaway is that flexibility and the willingness to adjust spending is the price of admission for higher withdrawal rates. Every strategy we discussed today requires some potential variability in year-to-year income. If you want or need the comfort of a perfectly consistent paycheck in retirement, you can absolutely have that—but you’ll likely start closer to the traditional 4% rule and use a more rigid withdrawal method. 

The second takeaway—and this is something I talk about often on this show—retirement spending is as much psychological as it is mathematical. Many of the clients we work with have more than enough money to thrive in retirement but still struggle to spend it. It doesn’t matter if they have a $2 million nest egg or a $15 million dollar nest egg, many still worry that a couple of bad years in the market and/or a costly, unknown event could derail everything. 

As a result of this very valid fear, they skip the trip, postpone the renovation, they say no to experiences with their grandkids. And they’re not alone. According to the Alliance for Lifetime Income, 46% of retirees say spending their savings creates anxiety, and 41% say they don’t know how to properly stage withdrawals from their accounts, leading to underspending in retirement. 

What’s fascinating is that academic research from David Blanchett and Michael Finke shows retirees spend about 80% of the income they receive from guaranteed sources like Social Security or pensions. But when it comes to their portfolio assets—401(k)s and IRAs—they spend less than half. Same dollars. Same purchasing power. But money that arrives as a paycheck tends to get spent, while money sitting in an investment account often feels untouchable.

That’s why rules-based spending frameworks are so powerful. When you have clear guardrails that tell you when you can safely spend more and when to pull back, you’re essentially turning your portfolio into a paycheck. And as I’ve shared on this show for years, building flexibility into your plan doesn’t just improve and protect it—it can also give you more confidence to actually spend and enjoy the early, active years of retirement.

The third and final takeaway is that the projected ending portfolio balance of the strategy you choose is something worth paying close attention to.

As the research we discussed today illustrates, the strategies that maximize spending during retirement typically leave the least amount of money behind. For example, the Probability-Based Guardrails approach produced the highest lifetime spending on a $1 million portfolio—about $1.55 million spent over retirement—but it ended with a median balance of just $230,000. 

The traditional fixed withdrawal approach did the opposite. It left behind a median balance of $1.42 million, but retirees using that method only spent about $1.17 million during retirement. In other words, many retirees following a traditional withdrawal strategy may ultimately leave behind more money than they actually used. 

And this pattern shows up in broader research as well. A Federal Reserve study found that retirees, on average, die with nearly twice as much savings as they had when they retired. Not slightly more. Nearly double. 

So if you’ve saved diligently but now feel hesitant to spend your nest egg, I want you to hear this clearly: the math, the research, and decades of market history all suggest that you can likely afford to spend more than you think—especially when a flexible, rules-based plan is guiding your decisions.

The Total Retirement System

Which brings me to one final point. For longtime listeners, you know that a guardrails-based spending approach is a core piece of our Total Retirement System—the four-part framework my team and I developed to help clients make tax-smart decisions with their money and thrive in retirement.

When I read Amy’s research, it was encouraging to see Morningstar’s data reinforce the same principle: flexible spending strategies can support higher withdrawal rates, generate more lifetime income, and still maintain discipline. These methods work well largely because they’re self-correcting. They allow spending to rise when your plan is ahead of schedule and signal modest pullbacks when it isn’t. No panic. No guesswork. Just a clear set of rules. 

And when you combine that with thoughtful tax planning, diversified investments, a war chest of cash and bonds, and a clear investment policy statement, you get a retirement plan designed not just to survive market volatility and the eventual surprises—but to navigate it with confidence.

That’s really what the Total Retirement System is about: taxes, income, estate, insurance, and investments all working together so every decision reinforces the next. 

If today’s episode has you thinking about your own retirement plan—whether your goal is to reduce taxes, maximize spending, leave a meaningful legacy, invest smarter, or strike a balance between all the above—that’s exactly the kind of work my team and I do every day. 

You can learn more about our process and schedule a free Retirement Strategy Session by following the link in the episode description, right there in your podcast app. You can also visit youstaywealthy.com and click on the big magenta colored button that says “work with me” to watch a short video of me explaining our process in more detail.    

How High Can You Retirement Withdrawal Rate Go

Alright, one final bonus for those of you who stuck with me all the way to the end. Earlier in the episode I mentioned that some retirees can actually start with withdrawal rates even higher than the ones in Morningstar’s study—and I promised I’d explain how.

So let’s quickly take a look at what actually drives those numbers.

In the original guardrails research, which I’ve included in today’s show notes, there are essentially three primary drivers that determine how high that starting withdrawal rate can be.

The first driver is your retirement time horizon. In other words, how long the portfolio needs to support withdrawals. 

In short, the longer the time horizon, the more conservative the starting withdrawal rate generally needs to be.

For example, the Guardrails research states that someone planning for a 30-year retirement can begin with a higher starting withdrawal rate than someone planning for 40 years or more.

That extra decade matters because the longer your money needs to last, the greater the impact of things like inflation, market volatility, and sequence-of-returns risk. So a longer retirement horizon usually means starting a little more cautiously.

The second driver is your portfolio’s asset allocation. More specifically, how much of the portfolio is allocated to stocks.

In general, multi-asset class portfolios with higher stock allocations have historically supported higher starting withdrawal rates.

A portfolio that’s 60% stocks, for example, has historically supported a higher withdrawal rate than a portfolio with 40% stocks (like the one used in Morningstar’s research).

And the reason is fairly intuitive. Stocks have historically provided more long-term growth than bonds which help to replenish withdrawals and keep up with inflation over multi-decade retirements.

But of course that growth comes with more volatility along the way, which means retirees need to be comfortable riding through some market ups and downs.

And that brings us to the third driver, which is what the researchers call the confidence standard.

In simple terms, this is the probability of success you want your plan to have. For example, the research looks at confidence standards like 99%, 95%, and 90% probability of success. That simply means the percentage of simulated retirement scenarios where the portfolio still had a positive balance at the end of the withdrawal period. 

The more conservative you want the plan to be—say targeting a 99% success rate—the lower the starting withdrawal rate will generally need to be. But if you’re comfortable with a 95% or 90% probability of success, the math allows for higher starting withdrawals.

Now, it’s important to remember that these guardrails strategies aren’t static. They include built-in adjustments—like the capital preservation rule and the prosperity rule—that automatically reduce spending when markets struggle and increase spending when things go well. Those rules are what allow the system to self-correct over time.

And when you combine those decision rules with a growth-oriented portfolio, a defined time horizon, and a chosen confidence standard, the research shows that starting safe withdrawal rates can be as high as 6.5%. 

Now that doesn’t mean everyone should start there, but it does highlight an important point. The 4% rule—as well as the numbers in the Morningstar study—are not fixed ceilings, they’re simply starting reference points.

What ultimately determines your withdrawal rate isn’t a single rule—it’s the combination of your goals, your portfolio, and your willingness to be flexible along the way.

And when those pieces work together inside a thoughtful framework, retirees often discover they have more spending power than they realized.

Which, at the end of the day, is really what all of this research is about: helping you spend your money with confidence, clarity, and purpose.

Thank you as always for listening, and once again, to view Amy’s research and the additional resources supporting today’s episode, just head over to youstaywealthy.com/274.