The biggest concern that most people have is “Will I run out of money?” This question can keep people up at night when the market swoons.
One plan to address a client’s concern is called Income Guardrails which is a dynamic distribution approach. This is more advanced strategy than the 4% rule. It allows a client to see what a monthly payment from their investment account can be. The strategy will monitor the amount of the portfolio and may make adjustments to that to the distribution with the market’s ups and downs. The goal of the strategy though is to keep those changes to a minimum by having set limits on when those tweaks will happen.
The situation below shows that the client can withdraw $4,030 on a portfolio of $1,175,000. If the account increases above $1,300,000 the monthly withdrawal can move up to almost $4,500 or if the value decreases to $655,000 then the monthly amount should decrease to $3,830.
