The retiree “who covers most of their basic living expenses—housing, food, utilities, and healthcare, for example—from nonportfolio sources such as Social Security, a pension, rental income, or an annuity will be better situated to absorb variations in portfolio cash flows than would the one who is relying more heavily on the portfolio to cover basic needs,” Benz said.
What is important for advisors and clients to consider, she added, is that variable systems like the guardrails system “tend to be more efficient, increasing withdrawals in up markets and ensuring that the retiree consumes more of his or her portfolio along the way.”
At the end of the day, choosing the right withdrawal method “is highly dependent on the retiree's personal situation: level of wealth, stability of preretirement income, and desire for certainty about not running out of money, among other factors,” Benz concluded.