"As an advisor with 25 years experience, I was skeptical too."

Naturally I was curious becuase I had never heard of such a thing! That's exactly why I studied the  research developed at The University of San Francisco School of Business. If there was a way people in retirement may be able to increase their income beyond the industry standard 4% Rule, they should know.

What is the 4% Rule?

"In 1994, William Bengen—who at the time was just starting out as a financial advisor—published a paper saying that retirees should start out withdrawing 4% of their assets annually, increase the distribution each year by the inflation rate and rebalance annually, and that their portfolio would last at least 30 years." Barrons Magazine. June 23rd, 2021.

The 4% rule originally recommended and asset allocation of 60% large cap stocks and 40% intermediate treasury bonds when interest rates averaged 3% back in 1994. Today, with inflation at record levels and bond yields at record lows. the 4% rule has been questioned heavily as a reliable strategy and was recently modified by Bengen to include small cap stocks to the asset mix.  Is taking on more risk justified to meet your income objectives or is safe and reliable income your goal?

The 4% Rule is Challenged

A more recent study from Morningstar is suggesting new retirees start with 3.3% withdrawals and adjust for inflation each year. That's a big pay cut from the 4% people have grown accustomed to.   Given the choice of more risk or less income, what if there are other options you could explore?

Consider these Income Distribution Methods to make your money last a lifetime. 

We discussed The 4% rule as one of the more traditional methods for income distribution.  Here's an in-depth look at 8 additional drawdown strategies per the American Institute of Economic Research you can download below.  Another strategy, Enhanced Investment Selection, focuses on which investment you should withdraw from versus how much you should withdraw.  SAIL, (Strategic Asset Income Ladder), is a proprietary formula that helps create a laddered structure to begin pulling income while allowing other assets to potentially to grow and meet future income needs while keeping your current income safe and reliable.  It is a very structured withdrawal process to allow the maximum income necessary while still promoting growth in remaining assets.  Lastly, HECM (or also known as (Coordinated Strategy) is a method using Home Equity to boost your income...but it has to be pre-planned, not after the fact. 

Income Distribution methods:

1. 4% Rule
2. Constant dollar, inflation adjusted
3. Constant percentage
4. Smoothed percentage
5. Constant-percentage ceiling
6. Constant-percentage floor
7. Inflation-adjusted percentage
8. Increasing percentage
9. Required minimum distribution percentage
10. Enhanced Investment Selection Method
11. SAIL
12. HECM Method (Coordinated Strategy)

You may be able to increase your retirement income AND lower your chance of running out of money…using these withdrawal strategies.

Let's find out which of the 12 Income Distribution Methods works best for you.