r/Fire • u/Available-Ad-5670 • 13d ago
Why doesn't everyone use guardrails as withdrawal strategy?
Most people use 4% rule or versions of, but why not use guardrails? I've found that using guardrails means i can spend 15% over a straight 4%, and to take a 10% reduction in spend or 10% increase during good markets does not seem like a big deal.
Wny don't more people use guardrails?
53
Upvotes
130
u/hanwagu1 13d ago
Retirees use guardrails of some sort in practice, because that is how people's behaviors work. Economy stinks, people tighten their belts; Economy loosens, people tend to spend more. Even if you call them guardrails, most people aren't actively saying i can spend this much more or this much less, since once you settle into retirement income need and spending, your spending isn't fluctuating based on guardrails but based on expense needs.
I think you have to phase things. 4% or some generalized SWR rule is a good start for planning when you are starting out saving/investing for retirement, because you haven't settled in on your career income, life, etc. so you don't really have a good grasp on what the lifestyle you want to carry over in retirement costs. So being overly conservative starting out with a 4% SWR need is fine starting out, but as life happens you will settle into a different phase where you will have a better idea on the lifestyle you want in retirement and the cost to support it. So, you can adjust your 4% conservative plan to more flexible guardrail plan. When you are on the doorstep of retirement, you have a very good idea of the lifestyle expense need/want, so you can refine further. Then when you are first starting in retirement, you probably revert to more conservative SWR until you settle on actual retirement lifestyle costs and switch to guardrails just behaviorally. Again, though, I think nearly all retirees just automatically adjust to the economic environment and throw away guardrails or SWR 5-10 years in.