Is Your Safe Withdrawal Strategy Actually Safe?

You’ve probably heard this before: “Just withdraw 4% from your investments each year and you’ll be safe in retirement.”

Sounds simple, right? Like rainbows and Skittles.

But here’s the truth: in today’s world, the 4% rule might be as risky as leaving your front door open with a sign that says, “Free stuff inside.”

So let’s break it down and get real about retirement withdrawals.

Where the 4% Rule Came From

Back in the 90s, a financial planner named William Bengen ran some numbers. He found that if you had a balanced portfolio—about 50% stocks and 50% bonds—you could safely withdraw 4% a year and your money would last around 30 years.

Boom. The 4% rule was born.

But that was the 90s. And while I do love the 90s (better hairline, better music), today’s economy is a different beast.

Why the 4% Rule May Not Work Today

1. We’re Living Longer

If both you and your spouse make it to age 65, there’s a 50% chance one of you will live to 90. Thirty years might not be enough anymore.

2. Inflation Hits Hard

The cost of living keeps rising, and the 4% rule might not keep up, especially when inflation spikes unexpectedly.

3. Bond Returns Are Lower

In the 90s, bonds gave decent returns. From 2010 to 2020? Close to 0%. With today’s interest rate uncertainty and $40 trillion in national debt, we can’t rely on bonds the same way.

4. Retirees Are Spending More

Let’s be honest: retirement is more than sitting on a porch. It’s trips, concerts, home renovations. We tend to spend more than we expect, especially in the early years.

Hidden Retirement Risks You Didn’t Expect

Let me walk you through a few retirement risks you might not be thinking about.

Sequence of Returns Risk

It’s not just how much you earn—it’s when. Losing money early in retirement increases your chances of running out, even if the average return is solid.

Taxes

Most people assume their taxes go down in retirement. Not true. Social Security can be taxed. Withdrawals from your 401(k) or IRA are taxed as ordinary income. And ordinary income tax is one of the least efficient taxes.

Healthcare Costs

Healthcare is the subscription you never asked for. Studies show individuals might spend $200K, while couples may see $400K in lifetime healthcare expenses. And healthcare inflation often grows faster than regular inflation.

So, What Can You Do?

I recommend building a dynamic withdrawal strategy. This means you adjust your withdrawals based on market performance and life changes.

Use the 3-Bucket Strategy

Cash Bucket (1-2 years): Emergency funds, short-term expenses.
Income Bucket (3-8 years): Bonds, annuities, dividend-paying funds.
Growth Bucket (10+ years): Stocks, real estate, business, or other long-term investments.

This setup gives your money room to grow, covers short-term needs, and protects you from sequence risk.

Consider Blue-Chip Dividend Stocks

They might not grow as fast, but companies like Apple or Coca-Cola offer stability and consistent income.

Choosing a Smarter Spending Strategy

Inflation-Adjusted Strategy

Spend a little more each year to keep up with inflation. This is common, but it has drawbacks.

Retirement Smile Strategy

Spend more early (fun stuff), less in the middle, and more at the end (healthcare). Often reflects reality better than a flat rate.

Retirement Spending Stages

Stage 1 (65-74): Full expenses.
Stage 2 (75-84): Reduce expenses by 10%.
Stage 3 (85+): Slight increase for healthcare, but still less than early years.

Guardrails Method

Spend more when the market is up, less when it’s down. Set a floor (can’t go below this) and a ceiling (won’t go above that) to protect yourself.

Tax-Smart Withdrawal Strategies

Doing Roth conversions in low-income years can reduce future tax bills. For example:

Convert when taxes are below 10%.
Generate tax-free income later.
Avoid high required minimum distributions (RMDs).

This can result in over a million dollars in extra wealth and significant tax savings.

Three Steps to Take Today

Define Your Retirement Lifestyle
- Trips? Hobbies? Volunteering?
- Knowing your vision helps determine how much income you’ll need.
Stress-Test Your Plan
- What happens if the market drops?
- If inflation rises?
- If taxes go up?
- Knowing these answers now gives you peace of mind later.
Talk to a Pro
- I’ll help you assess your risks and design a plan that fits your life.
- We’ll review spending strategies, run stress tests, and build your custom retirement blueprint.

Your retirement shouldn’t feel like a guessing game.

Let’s sit down together, run a free retirement stress test, and help you build a plan that actually fits your life.

Book your free Retirement Risk Assessment today

You’ve got one life. Let’s help you live your best one in retirement.

Dre Griggs