Adapting Portfolio Withdrawals in Retirement

Adapting Portfolio Withdrawals in Retirement


What is a Dynamic Portfolio Withdrawal Strategy?

When creating a plan for generating income in retirement, we think you will need a portfolio withdrawal strategy that allows you to receive withdrawals throughout your life while maintaining your purchasing power. You will want to balance the risk of outliving your assets with the risk of leaving too much behind. Also, whenever possible, you want to structure your withdrawals to maximize long-term after-tax wealth. 

One way to achieve this is by using a “dynamic withdrawal strategy”. This approach provides you the possibility to have a higher monthly income without jeopardizing your portfolio when markets decline. This strategy places “guardrails” around your portfolio to let you know when you will have to make adjustments to your withdrawals.

Meaning you reduce your portfolio withdrawals in bad times and increase them in times that are good. This is empowering since it informs you in advance when you will have to make adjustments and how large these adjustments will be. The guardrails set a ceiling and floor to your portfolio value can fluctuate in-between before action should be taken. 

Flexibility is the Key to Stability.

John Wooden

What Will the Adjustments Need to be in “Bad Times?”

In the bad times, your retirement activities may be temporarily restricted, but as markets recover and your portfolio rebounds you will likely be able to increase your spending again in the future.

2020 was a miserable year in many aspects. For many, there was less travel, less dining out in restaurants, less attending live events, and less overall in-person discretionary spending. As a result, many people spent much less than would have in a “normal” year. 

This decrease in spending would likely be similar to a cut in spending someone would have to make in a market downturn, bad times, when using a dynamic withdrawal or “portfolio guardrails” strategy. When markets decline and your portfolio value falls below the set floor, you will adapt, not eliminate, spending. You will still likely do things you enjoy, just in a modified fashion, much like what you did in 2020. 

If 2020 taught us anything, it’s that we humans are adaptive creatures and can adjust to things that before never thought could happen. Often we can not control the circumstances we find ourselves in, but we can always choose the attitude we take towards them. Have confidence in your ability to prevail, just like you did with all the obstacles you have already faced.


Feel free to email us at info@westernreservecm.com with any questions you have. If you would like to schedule time with us to discuss your specific situation click here.


Gage Paul, CFP®, RICP®, EA

Gage Paul is a financial planner at Western Reserve Capital Management. He works with the firm’s clients to create sustainable financial plans and investment strategies.

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