The Spending Challenge in Retirement

Saving for retirement gets a lot of attention. But once you’ve done the hard work of accumulating wealth, an equally important question emerges: how do you actually spend it?

For decades, the financial planning industry has approached this question with rigid, one-size-fits-all rules — withdraw 4% of your portfolio in year one, adjust for inflation, and hope for the best. While simple, this approach fails to account for a fundamental truth: retirement is not a static event. Markets move, health needs change, tax laws evolve, and your priorities shift over time.

At Burney Wealth Management, we believe your spending plan should be as dynamic as your life. That’s why we use a guardrail-based approach to retirement income planning. It's one that helps you spend more confidently today, while building in the flexibility to adapt to whatever the future brings.

This blog post explains our philosophy, compares the traditional approach to our dynamic method, and shows why we believe this is a better way to fund the retirement you’ve earned.

The Two Risks of Retirement Spending

Most people think about retirement risk in one direction: running out of money. That fear drives conservative spending, large cash reserves, and a persistent sense that you can’t quite afford to enjoy the wealth you’ve built. We call this the risk of overspending.

But there’s a second risk that rarely gets discussed: the risk of underspending.

If you’re spending less than you can sustainably afford, you’re forgoing the experiences, the generosity, and the quality of life that your years of hard work were meant to provide. You may look back later in life and wish you had traveled more, given more, or simply worried less.

These two risks are complementary: minimizing one maximizes the other. A plan with a 0% chance of overspending has a 100% chance of underspending. Our job is to help you find the right balance between these two risks: one that reflects your values, your comfort level, and your goals.

The Traditional Approach: Static Spending

The most common method of retirement income planning starts with a fixed spending amount. It's typically based on a percentage of your portfolio, such as the well-known “4% rule.” Under this approach, you withdraw a set dollar amount in year one, then increase it each year by the inflation rate. The spending level never changes based on how your investments perform.

How It Works

You and your advisor determine a “safe” annual withdrawal amount. That amount grows with inflation each year, regardless of what happens in the markets. The plan is then stress-tested using Monte Carlo simulations*, which produce a single metric: a “probability of success.” It's the percentage chance that your portfolio won’t run out before you pass away.

*A Monte Carlo simulation is a computerized mathematical technique that predicts possible outcomes of an uncertain event by running thousands of scenarios with random inputs.

The Strengths

Simplicity is the main advantage. A fixed spending number is easy to understand, easy to budget around, and gives a feeling of certainty. For some retirees, especially in the early years, this can provide comfort.

The Shortcomings

Despite its simplicity, the static approach has meaningful limitations:

It doesn’t adapt. If markets surge in your first decade of retirement, a static plan won’t let you benefit. Your portfolio grows, but your spending stays the same. Conversely, if markets decline sharply, the plan doesn’t proactively reduce spending — it simply marches toward depletion.

It creates a pass/fail mentality. Monte Carlo results like “85% probability of success” sound reassuring in theory, but they imply that 15% of the time you “fail.” In reality, no rational person would continue spending at the same rate while watching their portfolio decline. The pass/fail framing ignores the adjustments that real people naturally make.

It tends toward underspending. Because the static approach must plan for worst-case scenarios without any ability to adjust, it forces conservative spending from day one. The result: many retirees spend far less than they could safely afford, leaving significant wealth unspent — not out of choice, but out of fear.

Our Updated Approach: Dynamic Income with Guardrails

At Burney Wealth Management, we’ve recently adopted a dynamic guardrail-based approach to retirement income planning. Rather than locking you into a fixed spending level and hoping for the best, we build a plan that adapts to changing circumstances — just as you would in real life.

How Guardrails Work

The guardrail method establishes three key reference points for your portfolio:

These guardrails are expressed in specific dollar amounts, not abstract percentages. You’ll always know exactly what portfolio level would trigger an adjustment, and precisely how much your income would change.

The Key Advantage: Asymmetry by Design

Our guardrail plans are deliberately asymmetric. The distance from your current portfolio to the upper guardrail (where you get a raise) is typically much smaller than the distance to the lower guardrail (where spending is reduced). This means:

Raises are relatively easy to earn — a moderate period of positive returns can push your portfolio above the upper threshold.

Cuts require a substantial decline — your portfolio must fall significantly before any reduction is triggered, and even then, the income cut is modest (typically 5–10%).

This design prioritizes lifestyle protection while still giving you room to benefit from market growth over time.

Why This Allows Higher Spending

Because the guardrail approach has a built-in mechanism for adjusting spending downward if needed, it doesn’t need to plan for worst-case scenarios as conservatively as a static plan does. The plan knows it can course-correct, so it can start from a higher spending level with confidence.

Think of it this way: a car with brakes can safely travel faster than a car without them. The guardrails are your brakes — the ability to adjust is precisely what makes higher spending sustainable.

Side-by-Side: Static vs. Dynamic Approach

The table below summarizes the key differences between the traditional static spending approach and our dynamic guardrail method.

Stress-Testing: What Happens in the Worst Case?

A natural concern with any approach that allows higher spending is: what happens when markets crash? We address this head-on by stress-testing every client’s plan against some of the worst historical market environments, including the Great Depression and the 2008 Financial Crisis.

What Stress Tests Reveal

In most cases, the adjustments required during even severe downturns will likely be modest and temporary. A typical scenario might call for a 5–10% reduction in spending for a period of one to three years, after which income recovers as markets stabilize and grow.

This is critically different from the static approach, where a severe downturn simply accelerates the path toward depletion with no built-in corrective mechanism.

Turning Fear into a Plan

The most powerful aspect of stress-testing is psychological. The abstract fear of “running out of money” is replaced with a specific, bounded answer: “In the worst historical environment, your income would have been reduced by X% for Y years.”

For most clients, this answer is far less frightening than the unquantified fear they were carrying. Knowing the specific worst case is almost always better than imagining it.

For clients who are especially cautious, the guardrail parameters can be adjusted to further minimize the chance of any downward adjustment — for instance, by accepting a somewhat lower initial spending level in exchange for wider guardrails.

How We Implement This for You

Our process for building and managing your retirement income plan involves several key steps:

Our Philosophy: Permission to Live

We believe that the purpose of retirement planning is not to maximize the balance of your portfolio at the end of your life. It is to maximize the life you live along the way. Money is a tool, not a scorecard.

Too many retirees spend their years worrying about whether they can afford a trip, a gift to their grandchildren, or a home improvement — when the math clearly shows they can. The gap between what people spend and what they could spend is often not a gap in resources but a gap in confidence.

Our role is to close that gap. By providing you with a clear, well-tested, adaptive spending plan, we give you the confidence to direct your resources toward the things that matter most to you — whether that’s travel, family, philanthropy, or simply peace of mind.

Important Disclosures

This document is for educational and informational purposes only and does not constitute financial, tax, or legal advice. The concepts described here are general in nature and may not be appropriate for every individual’s circumstances.

The guardrail approach to retirement spending involves periodic adjustments to income based on portfolio performance and other factors. While this approach is designed to improve outcomes relative to static spending plans, it does not eliminate risk. All investment and spending projections are hypothetical and based on assumptions that may not reflect actual future conditions. Past performance is not a guarantee of future results.

Monte Carlo simulations model a wide range of possible outcomes and are hypothetical in nature. They do not reflect actual investment results. The comparisons between static and dynamic spending approaches presented in this document are for illustrative purposes and are simplified representations of complex planning methodologies.

The guardrail-based analysis referenced in this document utilizes Income Lab’s dynamic income planning platform. Income Lab does not provide investment, financial, tax, or legal advice. Please consult your advisor, tax professional, and/or legal counsel before making changes to your spending or financial plan.

Burney Wealth Management is an investment advisory firm. For more information about our firm and services, please refer to our Form ADV Part 2A or contact us directly.