Nothing gets me thinking about life quite like death.  I attended two funerals for clients in the last week and have been doing quite a bit of thinking.

At first, the obvious things came to mind. You can't take it with you. Money doesn't buy happiness. The most valuable things in the world aren't things. The richness in life does not come from being rich, it comes from relationships and experiences.

I could see this very clearly as we gathered to grieve our loss and celebrate the time we had with the deceased. For me, having to pick something up on the way home became a chance to do something nice for my wife rather than a little annoyance, and several concerns of mine utterly seemed unimportant. I hugged my wife and children little tighter, a little longer. We spend a lot of time in this profession assessing and critiquing products, strategies and software. After this past week, I am reminded of the limitations of these pursuits and just how important it is to have meaningful conversations with clients about their retirement life, not just their retirement assets.

The conversation reveals strategy which informs the product selection. Software merely supports the process. Software cannot translate body language, see the look in a person's eye, or hear the tone in the person's voice and understand what they might mean. Software has dramatically improved -- and I shudder to think of practicing without it -- in the 20-plus years I have been practicing, but I have yet to find the package that cares about a human being or a person's family.

I feel similarly about many of the academic studies regarding withdrawal rates and retirement income planning. I read as many of these as I can. I have dissected them from every angle I can conceive. I have written and spoken about them more times than I can remember. I am thankful for their existence, the efforts of their authors, and I refer to their findings often.

However, I also wonder if the financial planning community might go too far in relying on the studies and lead their clients to a lives less fulfilling than they could be.

Ever since Bill Bengen's 1994 Journal of Financial Planning paper that has led to the so-called "4 percent rule," people have been questioning whether or not the rule would hold up. Some of these examinations of the question lead one to believe retirees will do fine spending more. Most however, especially lately, seem to suggest the opposite.

The 4 percent rule is based on the historical record of a simple portfolio and a rigid series of withdrawals. In this election year, many people seem greatly concerned about the future and seem to have difficulty believing that financial assets can produce a good result. Some valuation measures indicate the expectation should be for results below the historical average.

That may be true, or it may not, but before you counsel clients to dramatically reduce their spending consider that most withdrawal rate studies, whether based on the historical record or a simulation, do not come to the 4 percent number from using average returns. The 4 percent comes from "worst case" or near worst case scenarios. I recommend Michael Kitces blog, Nerd's Eye View, for a good discussion of this issue. If we structure client cash flow to match up with an unprecedented worst-case scenario -- worse than the Depression, the Carter years, or the 2000s -- are we overdoing it?

Most withdrawal studies assume a steady inflation-adjusted spending pattern. Personally, I have yet to meet anyone who spends steadily unless they have no other choice. For most clients, when they felt things had gone well they loosened the purse strings and when they felt things had gone poorly, or would, they tightened up their spending. John Guyton's work illustrates clearly that people who are willing to build in some spending flexibility, can spend more than otherwise.

Here's the thing that's been on my mind recently: Regardless if you take the conservative approach and recommend an initial withdrawal rate of 4 percent or less or if your clients have the spending flexibility required for you to recommend something higher, most clients will have made less use than they could have of the funds they worked a lifetime to accumulate.

A strong majority of your clients will not need money nearly as long as you are assuming. Most Web sites that give life expectancy information put the probability of at least one member of a couple age 65 living 30 years at close to 20 percent. Your advice, for four out of five couples, is likely to result in a life that was less than it could have been, from a cash flow perspective anyway.

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