Everyone asks about the number — how much do I need to retire? But there’s another number that matters just as much, and almost nobody calculates it correctly: how much can I actually spend each year without running out?
The 4% rule gets thrown around a lot. Take 4% of your portfolio each year and you’ll be fine for 30 years. It’s a useful starting point, but it was built on historical data that may not reflect what the next 30 years looks like — especially with sequence-of-returns risk in the early years of retirement.
Here’s what we actually focus on with clients:
Your withdrawal rate matters less than when you’re withdrawing. A 20% market decline in year two of retirement is dramatically more damaging than the same decline in year 15. That’s not intuitive, but it’s math.
This is exactly why having a circuit breaker in your investment strategy isn’t just about protecting against drawdowns — it’s about protecting the sustainability of your income. When we reduce equity exposure in a downturn, we’re not just managing volatility. We’re preserving the portfolio’s ability to keep paying you.
If you’re within 10 years of retirement and you haven’t stress-tested your withdrawal plan against a bad early sequence, that’s worth doing now. Not when the market is down 30%.
For informational and educational purposes only. Not investment, tax, or legal advice. Lake Hills Wealth Management is a Registered Investment Advisor registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or training. Our current Form ADV, Part 2A is available at adviserinfo.sec.gov.