For decades now, the conventional wisdom was that retirees could withdraw about 4% of their assets every year without depleting principal. Yet with today's rock-bottom interest rates, a rising tide of early retirees and longer life expectancies, is 4% realistic anymore?

"The low current bond yields represent a clear challenge to the sustainability of 4% for recent retirees," notes Wade D. Pfau, director of macroeconomic policy at the National Graduate Institute for Policy Studies in Tokyo. "Retirement income strategies must be much broader than finding a sustainable withdrawal rate."

So what sort of distribution disciplines should financial advisors be recommending to retiree clients in the current environment?

Working With A Baseline
To be sure, many advisors have not completely abandoned the 4% solution. "I do make clients aware of it, but only as a general guideline," says A.J. Sohn of Antaeus Wealth Advisors in Boxborough, Mass. "You have to give people a baseline, and then you can work around it. So we build a customized plan for each client, because everybody's situation is different."

Sohn cites such differences as risk tolerance, long- and short-term objectives, lifestyle choices and financial resources. In other words, creating a customized withdrawal strategy is much like building any other financial plan.

"The withdrawal strategy is not something people should just apply and assume is going to work for them under all conditions," says William Bengen, president of Bengen Financial Services in Chula Vista and La Quinta, Calif., the man often credited with developing the 4% rule in the first place. The rule, he says, "assumes all your expenses and income will, over time, increase with inflation."

That's not always the case, however. So to offset inflation, Bengen suggests that a retiree might "start out with a lower withdrawal rate early in retirement and take out a higher rate later ... just to maintain his or her lifestyle."

Lifestyle discussions must be tempered with practicality, of course. "The paradigm has shifted to a more conservative needs-based withdrawal, with a concentration on preservation of principal, protection beyond inflation and, finally, profit of the overall portfolio," says Kimberly Foss, CEO of Empyrion Wealth Management in Sacramento, Calif.

Don't Retire Too Early
Many retirees, faced with the reality of a potential shortfall in meeting their needs, are forced to postpone retirement. After all, the longer they work the more they can save. And the shorter their retirement, the easier it is to preserve principal.

Yet those who try (or are pushed) to retire early-that is, before age 59½-face additional hurdles. The only way they can avoid the 10% penalty on early distributions from an IRA is to adhere to strict limits under IRS rule 72(t). These limits prevent young retirees from spending anything near 4% of their assets. "Early retirees can't withdraw enough to live on," cautions J. Graydon Coghlan, CEO of CFG Wealth Management, headquartered in San Diego. "The current withdrawal rate allowed under 72(t) is only about 1.3%," he says, noting that it changes daily.