Adjust With Portfolio Value and Market Conditions
Even though the popular "4% rule" assumes a static annual-dollar-withdrawal amount adjusted for inflation, retirees would be better off staying flexible about their withdrawals, taking less when the markets and their portfolios are down, while potentially taking more when the market and their portfolios are up.

Build in a 'Fudge Factor'
Discretionary expenditures like travel, new-car purchases, or unplanned outlays for home repairs or medical expenses, have the potential to throw your planned withdrawal rate off track. In addition to building those extraneous items into your budget, it is also wise to add a "fudge factor" in case those unplanned outlays exceed your forecasts.

Adjust With Your Time Horizon
Taking a fixed dollar amount or a fixed percentage rate from your portfolio neglects the fact that, as you age, you can safely take more from your portfolio than you could when you were younger. The original "4%" research assumed a 30-year time horizon, but retirees with shorter time horizons can reasonably take higher amounts.

Adjust Based on Your Portfolio Mix
Many retirees take withdrawal-rate guidance, such as the 4% guideline, and run with it. However, retirees with more-conservative portfolio mixes should use a more- conservative (lower) figure, whereas those with more-aggressive asset allocations might reasonably take a higher amount.

Factor in the Role of Taxes
The money saved in tax-deferred retirement-savings vehicles might look sufficient. However, taxes will affect your take-home withdrawals from those accounts. A 4% withdrawal from an $800,000 portfolio is $32,000—perhaps on target with your spending needs—but that amount shrivels to just $24,000, assuming a 25% tax hit.

Get Professional Advice
Withdrawal-rate planning is so complex and so important that it is one area where even sophisticated investors should consider getting a second opinion. Make it a point to review your retirement income plan with a Wintrust Wealth Management professional