Living More, Worrying Less: How Risk-Based Guardrails Unlock a Richer Retirement
For three decades, the so-called 4% rule was treated like gospel in retirement planning. The premise was simple: withdraw 4% of your portfolio in your first year of retirement, adjust that number for inflation each year, and statistically, your money should last 30 years [1].
It was clear, easy to explain, and for its time, remarkably effective. But we don’t live in that world anymore—and neither do you.
Why the 4% Rule Can Hold You Back
The 4% rule was created to address the risk of overspending—going through your savings too quickly and running out of money late in life. But for many people retiring today, there’s another risk that gets far too little attention: underspending. By sticking rigidly to a static rule, you may leave money on the table, creating surpluses that could have funded valuable experiences, travel, or simply more enjoyment. Morningstar’s studies confirm that when markets perform well or expenses vary, fixed rules miss adapting to these realities, limiting retirees’ ability to enjoy their savings [2]. I firmly believe that our most important legacies are not our investment accounts but the memories we create and the inspiration that we instill in our children and grandchildren. The evidence is clear: retirees benefit from a flexible withdrawal strategy that adapts to their individual needs while protecting them from unknown future hazards [3].
Advances in Retirement Research: A Smarter Approach for Dynamic Careers
Retirees today have compelling reasons to throw out the 4% rule, thanks to breakthroughs in both retirement research and advances in computing power. Modern analytical tools enable far more sophisticated simulations and projections than were possible when the 4% rule was first established, including the use of probability modeling and dynamic withdrawal strategies that respond to real market conditions and personal situations.
Research from leading firms such as Schwab and Vanguard highlights that retirement is far from linear—spending patterns change year to year, with higher discretionary outlays during the "go-go" years and declining expenses in later life, while healthcare costs can surge unexpectedly [4][5]. Our work also shows that creatives, business owners, and entrepreneurs often enjoy fulfilling professional pursuits into their 70s or even 80s, making fixed time horizons and spending models obsolete for many people.
That’s why we’ve turned to risk-based guardrails—a more flexible, responsive approach designed to account for non-linear income needs, market variability, individual career trajectories, and evolving health profiles- in short, life, enabling retirees to spend smarter and live more abundantly than ever before. As another advisor put it, "If your goal in retirement is to make the most of your assets while living so you can enjoy them, a risk-based guardrail dynamic withdrawal strategy will be the right choice for you" [6]. Risk-based guardrails, grounded in rigorous research, adjust to your assets and aspirations in real time—maximizing both financial security and the opportunity for a truly fulfilling retirement [7].
The Power of Risk-Based Guardrails
Risk-based guardrails represent the latest evolution in retirement spending strategies. Unlike the static 4% rule and early attempts at guardrails such as Guyton-Klinger [8], risk-based guardrails adapt spending in response to changes in portfolio health, market conditions, retirement horizon, and individual risk metrics, ensuring that withdrawals remain sustainable, flexible, and personalized throughout retirement [3].
- Kitces.com (a leading source of research for investment fiduciaries) explains that risk-based guardrails allow retirees to increase spending when markets are favorable and pull back when risk increases, striking a balance between safety and opportunity [7].
- Income Lab leverages these guardrails by using Monte Carlo simulations, guiding retirees when to safely adjust withdrawals up or down while avoiding the extremes of overdrawing or underspending.
- Morningstar emphasizes that guardrails can “ease clients’ worries” by creating a withdrawal system that aligns spending with real market outcomes and individual risk tolerance [3].
A Balanced Path to Retire Fully and Safely
For those retiring or entering retirement now, using risk-based guardrails means more than avoiding running out of money—it means unlocking the full potential of your retirement resources. This strategy empowers you to:
- Spend confidently when conditions are good, enriching your retirement experience
- Pull back strategically when risk rises, safeguarding your future security
- Avoid the frustration of underspending, ensuring your money supports the lifestyle you want