From the Retirement Planning hub — Evergreen Wealth Management — flat-fee retirement income, withdrawal, and Social Security planning for Massachusetts retirees.
The 4% rule says you can withdraw 4% of your portfolio in year one of retirement, then adjust for inflation each year, and your money should last 30 years. It was a useful starting point when William Bengen published his research in 1994, but in 2026 it can leave you either spending too little and dying with millions you never enjoyed — or spending too aggressively and running short in your late 80s. There are better, more flexible approaches now, and I use them with clients at Evergreen Wealth Management in Boston every day.
Where Did the 4% Rule Come From?
In 1994, financial planner William Bengen analyzed rolling 30-year periods of U.S. stock and bond returns going back to the 1920s. He found that a retiree who withdrew 4% of their portfolio in year one and increased that dollar amount by inflation each year would have never run out of money over any 30-year stretch.
The math worked like this: someone retiring with $1.5 million would take $60,000 in year one, then $61,800 if inflation was 3%, then $63,654 the next year, and so on — regardless of what the market did. In many historical periods, the retiree would have ended up with more money than they started with. In the worst periods, they barely scraped by.
The rule was never meant to be a rigid prescription. Bengen himself called it a “floor” — the minimum safe rate. But somehow it became gospel, repeated on every retirement blog and baked into countless financial plans.
Why Does the 4% Rule Fall Short Today?
The short answer: the world looks different than it did in 1994.
Bond yields are structurally different. The original research assumed a 50/50 stock-bond portfolio during decades when 10-year Treasuries yielded 5-8%. Today’s bond environment, even after rate increases, offers lower real returns than the historical average Bengen used.
People live longer. A healthy 62-year-old couple in Boston today has roughly a 50% chance that at least one spouse lives past 92. That is a 30+ year retirement — right at the edge of where the 4% rule was tested. Many retirements now stretch 35 or even 40 years.
It ignores your actual life. The 4% rule assumes you spend the same inflation-adjusted amount every single year for three decades. No one actually does this. You spend more in your active 60s traveling and renovating, less in your quieter 70s, and potentially much more in your 80s if you need care. A rigid withdrawal rate cannot account for this.
It ignores taxes and Social Security. The rule treats your portfolio as one lump sum. It does not consider that you might have a mix of pre-tax, Roth, and taxable accounts — each with different tax treatment — or that Social Security kicks in at 62, 67, or 70 and changes how much you need from your portfolio.
What Is a Dynamic Withdrawal Strategy?
A dynamic withdrawal strategy adjusts your spending based on how your portfolio actually performs, rather than blindly following a fixed schedule. Think of it as giving yourself a raise in good years and a modest pay cut in bad ones.
Here is a simple example. Say you retire at 65 with $2 million:
- Fixed 4% rule: You take $80,000 in year one, then adjust for inflation forever. If the market drops 30% in year two, you still take $82,400 (assuming 3% inflation). Your portfolio is now under $1.5 million and you are pulling over 5.5% — a dangerous pace.
- Dynamic approach: After that 30% drop, you reduce your withdrawal to $70,000 — still comfortable, but giving your portfolio room to recover. When the market bounces back, you gradually increase spending again.
Research from Wade Pfau and others shows that retirees who are willing to cut spending by just 10% during bad markets can safely start with a 5% initial withdrawal rate instead of 4%. On a $2 million portfolio, that is $100,000 versus $80,000 per year — a $20,000 annual difference that compounds over decades.
How Do Guardrails Work?
The guardrail approach, developed by financial planner Jonathan Guyton, is my preferred framework for clients at Evergreen Wealth Management. It gives you clear, predetermined rules so you are never guessing.
Here is how it works in practice:
- Set an initial withdrawal rate. Typically 4.5-5.5% depending on your age, assets, and flexibility.
- Establish upper and lower guardrails. For example, if your current withdrawal rate drifts above 6% (because the market dropped), you trigger a spending cut of 10%. If it falls below 3.5% (because the market soared), you give yourself a 10% raise.
- Check annually. Each year, recalculate your withdrawal rate as a percentage of your current portfolio. If you are between the guardrails, keep spending the same inflation-adjusted amount. Only adjust when you hit a rail.
A practical example for a Boston couple, both 65, with $3 million:
| Scenario | Portfolio Value | Annual Withdrawal | Rate | Action |
|---|---|---|---|---|
| Year 1 (start) | $3,000,000 | $150,000 | 5.0% | Initial rate |
| Year 3 (market drop) | $2,300,000 | $159,000 | 6.9% | Hit upper rail — cut 10% to $143,100 |
| Year 6 (recovery) | $3,400,000 | $147,400 | 4.3% | Between rails — no change |
| Year 9 (bull market) | $4,200,000 | $152,000 | 3.6% | Near lower rail — consider 10% raise |
The beauty of guardrails is psychological as much as mathematical. You never have to wonder “can I afford this?” — the rules tell you. And the spending cuts are temporary and modest, not permanent lifestyle changes.
How Much Can You Actually Spend in Retirement?
After working with hundreds of retirees in the Boston area, here is what I have found works in practice:
- Conservative (sleep-well-at-night): 3.5-4.0% initial rate with no flexibility. Best if you have no pension or Social Security is minimal.
- Moderate (most clients): 4.5-5.0% initial rate with guardrails. Works well when you have Social Security starting at 67-70 and are willing to trim spending 10% in bad markets.
- Aggressive (significant floor income): 5.0-6.0% initial rate with guardrails. Appropriate when you have a pension, generous Social Security, or other guaranteed income covering your fixed expenses.
The difference is enormous in real dollars. On a $2.5 million portfolio, the gap between a 3.5% and a 5% withdrawal rate is $37,500 per year — that is the difference between staying home and taking three international trips.
One thing I always tell clients: the biggest risk in retirement is not running out of money. For most people with $1-5 million saved, the biggest risk is underspending — being so afraid of running out that you never enjoy what you built.
What About Sequence of Returns Risk?
Sequence of returns risk is the reason the 4% rule exists in the first place. It is also the reason dynamic strategies beat fixed ones.
Here is the problem: if the market drops 25% in your first two years of retirement, you are pulling from a smaller base while it is shrinking. Even if the market recovers later, the early damage can be permanent with fixed withdrawals.
Two retirees can have the exact same average return over 30 years but wildly different outcomes depending on when the bad years hit. A retiree who got the bad years early might run out of money at 88. A retiree who got the bad years late might die with $4 million.
Dynamic strategies directly address this. By reducing withdrawals 10-15% during the first few bad years, you preserve capital during the most vulnerable period. A well-structured investment portfolio also helps — holding 2-3 years of spending in bonds or cash means you never have to sell stocks during a downturn.
How Does a Fee-Only Advisor Help With Withdrawal Planning?
Withdrawal strategy is one of the areas where professional guidance makes the biggest difference — and where the fee model matters most.
An advisor charging 1% of assets under management (AUM) has a structural incentive to keep your money invested. If you withdraw $150,000 from a $3 million portfolio, their fee drops by $1,500. Multiply that by 20 years and you start to see how the AUM model can subtly bias advice toward underspending.
At Evergreen Wealth Management, we charge a flat monthly fee regardless of portfolio size. Whether your portfolio is $1.5 million or $5 million, whether you withdraw $50,000 or $200,000, our fee does not change. That means our advice on how much to spend is genuinely unconflicted.
As a fee-only fiduciary, Nick Stevens, CFP® builds withdrawal plans that coordinate across all your accounts — pre-tax 401(k)s and IRAs, Roth accounts, taxable brokerage, and Social Security — to minimize your lifetime tax bill while maximizing the income you actually get to enjoy.
Frequently Asked Questions
Is the 4% rule still safe for retirement?
The 4% rule provides a conservative baseline, but it was designed for a different era of bond yields and shorter retirements. For most retirees today, especially those retiring before 65, a dynamic approach with guardrails is safer and allows you to spend more confidently. The 4% rule is not dangerous — it is just unnecessarily rigid.
How much can I withdraw from a $2 million portfolio?
Using the traditional 4% rule, $80,000 per year. Using a dynamic guardrail approach with modest flexibility, $90,000-$100,000 per year is realistic for most retirees with Social Security income. The right number depends on your age, other income sources, tax situation, and willingness to adjust spending in bad markets.
What withdrawal strategy does Evergreen Wealth Management use?
At Evergreen Wealth Management in Boston, we use a guardrail-based dynamic withdrawal strategy customized to each client. We set initial withdrawal rates based on your total financial picture — including Social Security timing, tax bracket management, and Roth conversion opportunities — then monitor annually and adjust when guardrails are triggered. Because we charge a flat monthly fee rather than a percentage of assets, our withdrawal recommendations are never influenced by how our fee might change.
Should I adjust my withdrawals when the market drops?
Yes, but only modestly. Research shows that reducing spending by just 10% during significant market downturns — and maintaining that cut until your portfolio recovers — dramatically improves your odds of never running out of money. This is far better than either ignoring the drop entirely or panicking and cutting spending by 40%.
Figuring out your withdrawal strategy is one of the most important financial decisions you will make in retirement — and it does not have to be stressful. If you want help building a plan that adapts to your life instead of locking you into a rigid formula, we would love to talk.
Nick Stevens, CFP® is the founder of Evergreen Wealth Management in Boston, a flat-fee financial planning and investment management firm. Evergreen charges a fixed monthly fee regardless of portfolio size. Learn more about how we work or get in touch.