Planning for lasting retirement income requires a thoughtful strategy, especially with factors like longevity, market volatility and evolving lifestyle needs in play. As retirement approaches, one of the most common questions people face is: “How much can I safely withdraw from my savings each year?” For decades, the 4% rule has served as a widely accepted guideline. The premise is straightforward: withdraw 4% of your total savings in the first year of retirement, then adjust that amount annually for inflation.

While the 4% rule offers a straightforward framework, it doesn’t account for the many variables that can affect your retirement income needs. For example, the age at which you retire plays a significant role. Retiring earlier means your savings need to last longer. Market performance is another key factor. Extended downturns could deplete your funds faster, while strong markets might allow for more flexibility. And of course, no one can predict exactly how long they’ll live, which makes it difficult to plan with certainty. Given these uncertainties, it’s worth exploring additional strategies to help ensure your retirement income is both reliable and sustainable.

Seek reliable income sources. Social Security provides a dependable monthly income for life. If you’re fortunate enough to have a pension, that’s another steady source. But for many retirees, these alone may not be enough. Annuities can help fill the gap by offering guaranteed income for a set period – or even for life. Whether you’re covering essentials like housing or healthcare or simply seeking peace of mind, annuities can be a valuable part of your retirement plan. Annuities are a complex investment product, so it is important to consult a financial advisor before incorporating them into your strategy to determine if they’re the right fit for your situation.

Embrace flexible spending. A flexible, dynamic spending approach allows retirees to adjust withdrawals based on personal circumstances and market performance. Unlike the fixed 4% rule, this strategy adapts to real-life circumstances. For example, during strong market years, a retiree might feel comfortable taking out more to fund a major purchase or experience. In contrast, during downturns, they might scale back spending to preserve their portfolio. This method helps extend the longevity of retirement savings while allowing for a more responsive and personalized financial plan. It requires regular review and a willingness to adapt, but it can offer greater sustainability and peace of mind over the long term.

The bucketing strategy. Some retirees prefer a “bucketing” approach to manage their savings. This strategy divides assets into three time-based buckets:

Bucket 1: Holds two to three years of cash in liquid accounts, untouched by market volatility.

Bucket 2: Contains three to four years of short-term investments with modest risk and return, used to replenish bucket 1 as needed.

Bucket 3: Invested in long-term growth assets like stocks and diversified funds, designed to outpace inflation and grow over time.

As the third bucket appreciates, funds are gradually moved into the second and then the first, creating a sustainable flow of income. This layered approach can offer peace of mind by aligning investment risk with time-based spending needs.

Tailor your strategy to fit your life. There’s no one-size-fits-all solution when it comes to retirement income. Your lifestyle, goals, and risk tolerance should ultimately guide your strategy. Your financial advisor can help you evaluate the pros and cons of each strategy and build a plan that supports both your current needs and long-term financial health.

Trisha Schaar, CRPC®, CLTC®, APMA®, is a Financial Advisor with Echelon Wealth Partners, a private wealth advisory practice of Ameriprise Financial Services, LLC in Marshall. She specializes in fee-based financial planning and asset management strategies and has been in practice for 11 years. To contact her, ameripriseadvisors.com/trisha.m.schaar, (507) 532-2210

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