It's one of the most common questions we hear from people approaching retirement.

And it's one of the hardest to answer. Not because the math is complicated, but because the old rules of thumb that most people rely on were never designed for real life.

The 4% rule. Monte Carlo probabilities. A single "success rate" number.

These tools can be useful. But on their own, they often leave retirees with more anxiety, not less.

Here's why, and what a better approach looks like.

The Problem With the 4% Rule

In 1994, researcher William Bengen published a landmark study showing that a retiree could withdraw 4% of their portfolio in year one, adjust for inflation each year, and historically have a very high chance of not running out of money over 30 years.

The research was solid. The problem is what happened next.

That guideline became a universal prescription. "Just take 4%" became the answer to one of the most personal questions in financial planning, regardless of your age, your other income sources, your spending patterns, or what the market is doing when you retire.

The core issue: The 4% rule is static. It tells you what to spend on Day 1, then locks you in. No matter what happens next. Real retirement isn't static. Your plan shouldn't be either.

Monte Carlo Simulations Help, But They Don't Tell the Full Story

Modern financial planning software runs thousands of hypothetical market scenarios to calculate a "probability of success." Instead of one historical sequence, you get a statistical distribution of outcomes.

That's a genuine improvement.

But it still leaves most retirees staring at a single number — say, 87% probability of success — without knowing what to do with it.

What does 87% mean for your day-to-day life? What happens if it drops to 70%? Do you cut spending? By how much? When?

Watching that percentage tick downward during a market decline, while your portfolio balance is also falling, is one of the most stressful experiences retirees face.

The math is better. But the experience often isn't.

A Better Approach: Retirement Income Guardrails

This is why we use a guardrails-based retirement income strategy, powered by Income Lab, a tool built specifically for dynamic, adaptive retirement income planning.

The idea is straightforward.

Rather than locking in a fixed withdrawal rate or managing anxiety around a probability score, we define, in plain dollar terms, exactly what would need to happen before we change your spending, and exactly what that change would look like.

Here's a simple example:

Starting portfolio: $2,000,000 | Current monthly income: $14,900/month

If the portfolio rises to $2,119,000, the framework may allow an increase to $15,800/month (depending on the plan’s assumptions and updated results).

If the portfolio falls to $1,559,000, the framework calls for an adjustment to $14,100/month: a pre-planned change designed to help manage risk.

(Values shown in today's dollars, gross of tax and savings, net of variable expenses.)

Notice what this does: it turns uncertainty into a plan you can follow.

Instead of watching an abstract percentage and wondering when to worry, you know exactly where the lines are. No change is needed until the portfolio reaches $1,559,000. If that lower guardrail is ever reached, the adjustment is $800/month. Not a financial emergency.

You already know what's coming. You can plan for it.

We Stress-Test Against the Worst Markets in History

One of the most valuable conversations we have with clients is the "what if" exercise.

Using Income Lab, we can show you how your guardrails strategy would have performed if you had retired just before some of the worst market environments in modern history:

• The Great Depression
• The Stagflation Era of the 1970s
• The Dot-Com Crash (2000-2002)
• The Global Financial Crisis (2008-2009)

Looking at historical scenarios can give you a sense of what spending adjustments under a guardrails strategy might look like. And having that context ahead of time might change how you experience a downturn.

For clients who want more protection against downside risk, we can tighten the guardrails by raising the threshold for upward adjustments and building in more cushion. Some clients even choose to skip income increases in the early years to create a larger buffer against future cuts.

The goal isn't to predict the future. It's to make sure you've already thought through the response before you need it.

What This Means for Your Plan

When we build a retirement income plan using guardrails, here's what you get:

• A clear starting point. An initial spending level built around your specific situation. Not a one-size-fits-all percentage.
• Defined thresholds. The exact portfolio values that would trigger a spending adjustment, expressed in dollars, not percentages.
• Pre-planned responses. The specific spending change that would be recommended if a guardrail is triggered. No surprises.
• Historical context. A stress test showing how your plan would have held up through the worst markets of the past 100 years.
• A plan that adapts. Guardrails that update over time as your situation changes. Not a number you set once and forget.

The bottom line

The question "how much can I spend in retirement?" deserves a real answer. Not a rule of thumb.

It deserves a plan that moves with you. One that gives you permission to spend when your portfolio supports it, and a clear, manageable path when it doesn't.

That's what guardrails are built to do.

If you'd like to see what a guardrails plan would look like for your specific situation, including a stress test against historical market scenarios, we'd love to walk you through it.

Have any questions, comments, or feedback? Just hit reply! We personally go through and answer each message.
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Thanks for reading!
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​Keeping wealth in focus,

The MY Wealth Management Team