The 4% rule has become something like a religious topic to retirement planners. In some way, it’s become a holy number like pi—a guideline, a rule of thumb, or a concept to be snubbed. Even if you use safe 4% withdrawal rates as a framework for clients, you probably have to come up with ways to innovate around it.

Bill Bengen himself, the author of the rule, has said on occasion that there are a variety of numbers that could work depending on when you retire. The 4% rule assumes you can take a safe annual withdrawal of 4% and then can adjust for inflation. He has adjusted that rule and called it SAFEMAX, 4.5%, when the allocation includes small-caps, and the rule was designed to cover the worst 30-year retirement periods, especially the era of high inflation that started in 1968.

Advisors at the Atlanta firm Brightworth say they have found their own new wrinkle for the number. According to research run by one of the firm’s financial planners, Wesley Wood, the simple tweak of making more frequent withdrawals, not just modeling a lump sum withdrawal for the year, can allow advisors to squeeze extra basis points out of a portfolio and increase its longevity by years.

“We really wanted to re-examine a lot of research that we had read but hadn’t done ourselves,” Wood says. “So we took monthly historical data from different indices and built some sample portfolios and back-tested them with rolling monthly periods starting in 1926 through the present.”

What the Brightworth team found intriguing was what happened when the retirees took withdrawals monthly or quarterly, as most do, instead of taking the annual lump. Doing it that way often allowed the investors to take out 20 extra basis points a year. “So instead of 4% it might be more like 4.2%,” Wood says. “It might not sound like much, but that’s 5% more in spending,” he says. “So it could mean an extra vacation or a nicer car. Giving more to charity or something like that.

“It wasn’t necessarily what we went out to test. We just wanted to validate the research that was already out there. But it was something we stumbled upon.”

The math generally works, he says, because the market historically has been up more than it’s been down. So if you’re taking a lump sum distribution for all of your spending needs the first day of the year, you have less in funds to go up over the course of the year. “If you take it monthly or quarterly, you’re leaving it a month in the account to grow.” He calls it the opposite of dollar cost averaging.

There are also some behavioral advantages, he says: Clients are used to receiving a paycheck every two weeks, and so it’s easier for them to budget that than take a single lump-sum withdrawal on the first day of each year. “Most research that I’ve read [assumes the withdrawals are] annual,” Wood says, and most of his clients are taking the quarterly and monthly withdrawals. Again, if you keep it invested, you participate in more growth, he says.

The firm looked at rolling 30-year periods starting every month from January 1926 to the present, for approximately 770 payment periods, he says. The 4% rule is generally based on the worst 30-year period, he says, so many periods can get you extra withdrawals beyond 20 extra basis points.

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