We have all heard about the 4% rule, that is, when you begin your retirement you withdraw 4% of your account value annually to maintain your lifestyle and adjust the withdrawal amount up annually to match inflation. There have been many arguments as to why this rule is obsolete. Another way to prepare for paying yourself from your retirement nest egg is to establish your ceiling and floor.
Here is how this concept works:
You begin with an initial level of spending and then, depending on how much your nest egg’s value increases or decreases, adjust withdrawals up or down within bounds you set, say, reducing the current year’s withdrawal by no more than 2.5% from the previous year’s withdrawal and increasing it by no more than 5%.

I like this method of withdrawal better than the 4% rule because it forces you to review your portfolio annually and readjust your withdrawals.

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