In my recent Kiplinger contribution, I explored how longer lifespans may fundamentally reshape important life planning decisions.

But those questions point to a more universal concern: How do we create lives of meaning while ensuring our financial resources support us throughout our journey?

This isn’t just about outliving your money – it’s about living well at every stage.

What my Kiplinger piece didn’t cover were the technical, financial planning solutions for navigating the intersection of longevity, fulfillment, and financial security.

I’ll use this piece to dig into that.

The Status Quo is Broken:

Retirement planning is stuck in the past.

Most of the models and software available assume a 30-year retirement and a fixed-rate withdrawal strategy, even as today’s retirees live longer, spend unevenly, and face new risks.

In a world where retirement could last as long as a career, outdated models lead to either overspending too soon or under-living out of fear.

In the following sections I’ll break down the flaws in the most common withdrawal strategy and propose an alternative approach rooted in both behavioral and financial economics.

But first, the big question: How much is “enough?”

The Accumulation Phase:

Most of us know the basic, most reliable strategy for asset accumulation: save and invest as early and often as possible.

However, how do you determine whether your nest egg is adequate?

For starters, there is no magic number.

What you need is a function of what you spend. The less your lifestyle demands, the less you need to save, and the more flexibility/freedom you gain over how and when to retire.

That said, one widely used rule of thumb (that we’ll poke holes in later) for retirement spending is the 4% Rule, which states that you can withdraw 4% of your portfolio annually.

So, using that back-of-the-envelope rule, if you want to withdraw $80,000 per year from your portfolio in retirement, you’d need roughly $2 million saved.

Another simple accumulation benchmark is known as the 10x Salary Rule. This is where you aim to save:

• 1x your salary by age 30

• 3x your salary by age 40

• 6x your salary by age 50

• 8x your salary by age 60

• 10x your salary by age 67.

Of course, these are just starting points. Future spending needs, market conditions, and personal factors (notably the taxability of assets across different account types) all impact what’s truly “enough.”

Weaknesses of the 4% Rule:

Traditional retirement planning relies on this crude, oversimplified approach to portfolio withdrawals. While convenient, it’s far from optimal.

For starters, the 4% Rule was built on historical backtesting, not real-world adaptability, and assumes:

• market history will repeat itself

• retirees have predictable, static spending needs

• withdrawals remain fixed, even in a down market

In essence, the rule was designed as an easy-to-use heuristic rather than a dynamic, reality-tested solution.

Spoiler alert: Many advisors love the 4% Rule as it allows them to manage large client books efficiently – not because it’s the best strategy for retirees’ needs or long-term security.

Simply put, it prioritizes ease over customization.

The Better Approach to Retirement Planning

A superior approach combines (1) securing a baseline income, (2) dynamic withdrawals (3) smart asset allocation and (4) maintaining spending buffers.

Step 1: Secure Your Minimum Income Floor

Minimum Dignity Floor (MDF): Necessities are necessities – you need to have a plan to fund your housing, utilities, transportation, food, and healthcare – what we refer to as your “Minimum Dignity Floor.” These are non-negotiable.

One way to determine your MDF is to sum your core living expenses and subtract guaranteed income sources (i.e. Social Security, pensions etc.). The remaining gap needs to be filled with portfolio withdrawals or other secure income sources.

Bond Ladders: When it comes to portfolio withdrawals, bond ladders provide a reliable way to cover monthly and annual cash needs.

By structuring a ladder with target maturity bond funds or individual bonds, retirees can align maturities with future expenses, ensuring predictable income without relying on market timing.

A well-structured bond ladder might cover 7-10+ years of cash flow needs, depending on the retiree’s risk tolerance and other income sources.

For added flexibility, target date bond funds (often ETFs) can be useful as they diversify credit risk and are easier to liquidate if funds are needed sooner than expected.

Annuities: Annuities get a bad rap, and rightfully so as most are loaded with fees and sold/churned inappropriately by salespeople who get paid on commission.

However, there are good, low-fee annuities that can provide a hedge against longevity risk and a stable income foundation.

One key limitation of annuities = limited inflation protection.

While it’s true they can be structured to create “lifetime income” – many companies selling annuities cap their inflation adjustment riders at 3% per year.

From 1914-2024, inflation averaged 3.16% per year. However, in June 2022, although temporary, inflation peaked at 9.1%.

This means that even inflation-adjusted annuities, while sometimes a useful tool, are imperfect as they may fail to keep pace with real costs over time.

Step 2: Implement a Dynamic Withdrawal Strategy

Retirement spending isn’t a flat line, it follows the “retirement spending smile.”

Just as a smile curves upward at both ends with a dip in the middle, retirement expenses typically follow the same pattern.

Research shows that retirees typically spend more in the early, active “go-go” years (enjoying travel, hobbies, and dining out), then significantly slow down in the “slow-go” years (as energy and mobility naturally decline), before expenses rise again in the later “no-go” years (when healthcare and support costs increase).

This is where a dynamic withdrawal strategy comes in.

Instead of rigidly withdrawing the same amount every year, discretionary spending should be front-loaded when retirees are healthiest and most active.

As discretionary expenses naturally decline, this creates financial flexibility to handle potentially higher medical or long-term care costs that may emerge down the road.

In practice, we achieve this by utilizing spending guardrails.

Rather than arbitrarily underspending early in retirement, we establish a spending baseline and adjust withdrawals only if the portfolio hits upper or lower guardrails.

If the market performs well and hits the upper guardrail, retirees can dial up spending.

If the market underperforms and hits the lower guardrail, temporary spending adjustments are implemented to protect long-term wealth.

By aligning portfolio withdrawals with natural spending patterns, retirees avoid unnecessary underspending in early years and ensure financial flexibility when it matters most.

Step 3: Optimize Asset Management

From an asset allocation standpoint, our high-level approach aligns assets with time horizons. While we do customize specific equity vs. fixed income percentages based on each client’s unique risk tolerance, capacity, and needs, the broader framework looks something like this:

• Years 0-10 of retirement: Maintain 7-10 years of expected withdrawals in safer assets (bonds, cash reserves, annuities) to mitigate sequence risk. This provides a liquidity buffer in case early market returns are poor.

• Years 10+: Equities are earmarked for cash flow needs beyond the initial 7-10 year window, allowing ample time to weather the ebbs and flows of the market and maintain growth opportunities.

Additional asset management considerations as we get more granular:

Roth Conversions: Early in retirement, and depending on the broader picture of a household’s taxes and portfolio composition, converting pre-tax assets to Roth can be an effective, long-term asset relocation strategy.

Most commonly, we’ve found that the sweet spot for making these conversions is oftentimes between the start of retirement (when there’s a drop in income) and the commencement of Social Security.

Strategically filling lower tax brackets and increasing tax-free assets allows us to play chess instead of checkers when it comes to dynamic, multi-year tax planning.

Own Assets that Keep Up with (or Outpace) Inflation: Inflation erodes purchasing power, but the right assets can keep you ahead of it.

Public equities and real estate are two of the best inflation hedges, as they have historically outpaced rising costs over time.

While gold and commodities are often viewed as inflationary safe havens, they have a major drawback – they don’t produce income.

By prioritizing productive assets rather than static stores of value, investors can preserve purchasing power rather than relying on speculation.

Take, for example, a total market index fund. These funds own the entire stock market which includes gold mining, energy, and commodity companies. So, if inflation pushes up their market value, your portfolio captures that upside.

In the case of real estate, whether a publicly traded REIT or rental property that you own directly, rising inflation tends to increase both property values and rental income, making real estate a particularly effective inflation hedge.

Additionally, real estate provides tangible utility. Unlike gold, which just sits there, a property has intrinsic value and generates revenue.

Mind your fees: Fees erode even the best-positioned portfolios. Every dollar lost to excessive fees is a dollar that isn’t compounding for you.

Over decades, high expense ratios, unnecessarily high “investment management” fees, and hidden costs can quietly drain six or even seven figures from a retirement portfolio.

• Eliminate high-cost funds. Low-cost index funds consistently outperform high-fee active managers over the long term.
• Scrutinize investment advisory fees. If you’re paying for advice, ensure you’re getting real value – comprehensive financial planning, tax optimization, behavioral coaching – not just basic asset allocation you could get for free.
• Control hidden costs. Frequent trading, excessive turnover, and tax-inefficient strategies can create a drag on performance that’s just as damaging as visible fees.

Pay for value, reduce or eliminate the rest. Every basis point saved keeps more of your money working for you.

Tax-Efficiency: Careful tax planning can help retirees avoid unnecessary taxes and costly tripwires such as IRMAA Medicare surcharges, Social Security taxation thresholds, and net investment income tax (NIIT). But optimizing taxes isn’t just about withdrawals – it’s also about where assets are held.

• Tax-inefficient investments (like high-dividend funds, REITs, and certain fixed income) are best placed in tax-deferred or tax-free accounts to shield income from annual taxation.
• Speculative stocks with high upside potential are better suited for taxable accounts, where losses can be harvested for tax benefits and gains receive preferential long-term capital gains treatment.
• Municipal bonds may be ideal for taxable accounts, as their interest is exempt from federal (and sometimes state) taxes.

It’s not just about minimizing taxes – it’s about stopping the slow leaks that quietly drain wealth, avoiding penalties that serve no purpose, and keeping more of your money working for you, so it funds not just your future, but the life you want to live.

Step 4: Maintain Spending Buffers

6-12 Month Liquidity Reserve: Liquidity reserve funds are beneficial in all stages of your financial lifecycle. They balance accessibility with opportunity cost – providing a safety buffer without overly reducing portfolio growth potential.

Having a liquidity reserve helps retirees avoid selling assets at a loss due to unplanned healthcare costs, vehicle replacements, home repairs, or other emergencies.

HELOCs as a Sequence of Returns Risk Buffer: A home equity line of credit (HELOC) doesn’t have to be just a backup safety buffer – it’s a flexible liquidity tool that can be tapped during down markets to avoid selling assets at depressed prices.

Hedging Longevity Risk with Delayed Social Security Benefits

One of the most effective hedges against longevity risk from a cash flow standpoint is delaying Social Security benefits until age 70.

• For every year you delay past full retirement age (FRA), your benefit increases by 8% per year—a guaranteed return that’s difficult to match elsewhere.

• Unlike the limited inflation adjustments on annuity products, Social Security recipients receive cost-of-living adjustments (COLAs) tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In 2023, with high inflation, the COLA was 8.7% – far outpacing private annuity inflation riders.

• The break-even point for delaying typically falls between ages 78-84, making it an attractive longevity strategy.

In two member household, delaying Social Security is especially important for the higher-earning spouse.

When the first spouse passes away, the surviving spouse steps up to the higher of the two benefits. If the primary earner delays until 70, it not only increases their lifetime benefit but also ensures the surviving spouse receives the highest possible payout for the rest of their life.

Why does this matter?

According to the American Academy of Actuaries, for a married, non-smoking couple both age 65, there’s now a 15% chance at least one of them lives to see age 100.

Having the spouse with the higher income benefit delay their Social Security isn’t just about individual longevity – it’s also about protecting the financial security of the second-to-die spouse.

Final Thoughts:

A well-constructed plan isn’t just about numbers – it’s about having the confidence to stay the course despite uncertainty and truly live a rich life.

The goal isn’t just to preserve wealth but to use it with purpose – to fund experiences, strengthen relationships, and create the kind of “memory dividends” that compound in meaning long after the money is spent.

Markets will fluctuate, interest rates will shift, and new risks will emerge. But by building a plan that adapts, focusing on what you can control + spending with intention, you ensure your wealth serves its real purpose: not just lasting a lifetime, but enriching it.

While true immortality remains the stuff of science fiction, a well-constructed financial plan ensures your wealth endures as long as you do, however long that may be.

Here’s to your wHealth.

For an abridged version of this blog entry, read the pared down version published on Kiplinger.