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Something to always keep in mind when it comes to financial rules of thumb is the fact they are just that: “Rules of thumb”. While the four percent rule might be a well-known standard, a recent Morningstar panel determined that in today’s economic climate, a 3.3 percent withdrawal rate might fare better for a conservative portfolio.

Starting safe withdrawal rate: While a three percent withdrawal rate might seem low for some, it’s important to keep in mind that today’s retirees have portfolio balances appreciably higher than they were a decade ago. Additionally, adjusting components, such as tolerating a lower success rate, can create an opportunity to take higher lifetime withdrawals. As an example, a retiree living with an 80 percent success rate could begin with a 3.9 percent withdrawal rate.

Flexible withdrawal rate: At the same time, taking a variable withdrawal approach based on portfolio performance can help increase starting and lifetime withdrawals, but with potentially more volatile cash flow. The four variable withdrawal approaches highlighted here include:

📌Forgoing inflation: Forgoing upward inflation adjustments after a portfolio declines in value

📌Required Minimum Distributions: Portfolio value divided by life expectancy

📌“Guardrails: Incorporates variability based on market performance, but with boundaries

📌10 percent reduction following losing years: Adjusts withdrawals down by 10 percent in the year following a year where the portfolio declines

My two cents: If you’re short on retirement funds and big on spending, it doesn’t mean you cannot retire as planned. Instead, you might need to make tradeoffs in the way of more sophisticated planning and willingness to accept additional risks.