The Missing Piece in Retirement Planning May Be How You Withdraw Your Money
- Joe Boughan
- 4 days ago
- 12 min read
Updated: 5 hours ago
First: The Problem Hiding in Plain Sight
For most of our working lives, retirement planning is framed around accumulation.
How much should we save? How should we invest? What rate of return is realistic? Will the portfolio be large enough?
These are sensible questions.
Necessary questions. For decades, they sit at the center of financial life, shaping decisions large and small—how aggressively to save, how much risk to take, when to exercise stock options, whether to pay down a mortgage, whether retirement remains ten years away or quietly moves closer.
Over time, those questions become familiar companions.
And then, almost imperceptibly, the nature of the challenge changes.
The moment a family moves from building wealth to living from wealth, the central question is no longer simply how to grow assets. It becomes something more delicate, and in many ways more consequential:
How should those assets be used?
That question sounds deceptively simple. It is not.
Because retirement is not merely an investment problem. It is, at its core, a spending problem—one shaped by uncertainty, emotion, longevity, taxes, family priorities, and markets that remain stubbornly indifferent to the timing of our needs.
This is where many thoughtful investors encounter an uncomfortable truth.
Markets do not distribute returns evenly. They surge, stall, correct, recover, and occasionally break hearts. Long-term averages may look orderly on paper, but real life is experienced one year at a time—and often one unsettling season at a time.
Retirement spending, by contrast, tends to be remarkably steady.
The bills arrive. Travel plans are booked. Healthcare costs evolve. Children marry.
Grandchildren are born. Life continues asking for cash flow, regardless of what the market happens to be doing.
And so retirees face a quiet but important risk:
not simply market volatility— but the possibility of having to draw income from investments during unfavorable market conditions.
That distinction matters.
Before we share our interesting solutions and thoughts on this, if you are looking to speak with an advisor who specializes in guidance here, check out our opportunity for a free consultation: https://www.parkmountfinancial.com/free-consultation-schedule
Two families can retire with portfolios of similar size, spend similar amounts, and even experience similar long-term average market returns—yet still arrive at meaningfully different outcomes over time based on a wide range of variables, including taxes, spending flexibility, market sequence, and how withdrawals are structured.
Most investors are familiar with sequence of returns risk—the idea that poor market performance early in retirement can place outsized pressure on a portfolio.
Far fewer spend meaningful time considering a related idea:
The sequence from which withdrawals are sourced may matter as well.
Not as a silver bullet. Not as a guarantee. Not as a formula that removes uncertainty.
But as a legitimate planning variable—one that may deserve more thoughtful attention than it typically receives.
That possibility is worth examining carefully.
The conventional approaches, to be fair, are not without merit.
One of the most common is the familiar bucket strategy—a framework that separates retirement assets into distinct pools: short-term reserves for immediate spending, intermediate assets for the years ahead, and longer-term growth capital invested more aggressively.
The appeal is easy to understand.
It introduces order. It creates psychological clarity. It may help investors feel less compelled to sell long-term investments during periods of market stress, which can be behaviorally valuable.
In that sense, the bucket strategy often succeeds in a way that should not be dismissed: it helps people stay steady.
That matters.
Still, thoughtful investors may reasonably ask whether its strengths are primarily behavioral, economic, or some combination of both. Holding substantial cash reserves may create comfort, but comfort can carry tradeoffs—particularly if large portions of capital remain invested conservatively for extended periods while inflation quietly erodes purchasing power.
Some academicians have had critiques that suggest the three-bucket approach does not improve any tangible financial outcomes, and is rather more about comfort:
That does not make the framework wrong.
It simply makes it incomplete.
Another common solution is the use of income annuities, offered by insurers such as MassMutual or New York Life, among others.
For some households, annuities can play an important role. They may provide contractual income, reduce longevity concerns, and create a valuable baseline of predictable cash flow that can help support broader retirement planning.
Those are meaningful advantages.
Yet those advantages often come alongside equally meaningful tradeoffs: reduced liquidity, less flexibility, estate planning tradeoffs, and the reality that once capital is committed, optionality is often reduced.
Again, not wrong.
Simply a tool—with strengths and limitations, like any other. Further info on annuities can be found here: https://www.fidelity.com/learning-center/personal-finance/retirement/annuities-pros-and-cons
And beneath both approaches lies a broader truth that deserves honest discussion:
many retirement withdrawal frameworks rely on relatively straightforward spending rules.
Spend proportionally. Maintain a set allocation. Repeat. Or spend from buckets in down market, Refill later.
Simple rules are not inherently bad. In fact, simplicity is often wise.
But retirement itself is not simple.
It is dynamic. Markets are dynamic. Tax policy is dynamic. Spending needs evolve. Human psychology and needs change on case by case basis.
Which raises a thoughtful question:
Could the way retirees source withdrawals deserve more deliberate design?
Not in a speculative way.
Not in a way that depends on forecasting markets.
And not in a way that promises better outcomes.
Simply in a way that recognizes an intuitive reality:
there may be a meaningful difference between selling assets indiscriminately and spending from assets more thoughtfully, depending on prevailing market conditions and the options available within a portfolio.
That is not a dramatic claim.
It is a modest one.
But modest ideas, examined honestly, can sometimes lead to meaningful planning insight.
And that is where this conversation becomes interesting.
Because what if the better retirement income question is not merely:
What should I own?
But rather:
Which assets should fund spending—and when?
Once the question is framed properly, the idea itself becomes surprisingly intuitive.
Imagine a retirement portfolio divided into two familiar sleeves: one designed primarily for long-term growth, the other for stability and reserve spending. In practical terms, that often means equities on one side and fixed income on the other—each serving a distinct purpose, each carrying its own strengths, and each behaving differently as markets move through cycles.
Traditionally, retirees draw proportionally from both sleeves, selling a little of everything as income is needed. It is clean, straightforward, and widely accepted. There is much to be said for that simplicity.
But simplicity can sometimes obscure a thoughtful question:
Must spending always come proportionally from every part of the portfolio, regardless of market conditions?
Or, under certain circumstances, might it be reasonable to be more selective about which sleeve funds spending without the same drag on client results that the 3 bucket system creates?
That is the idea we set out to explore—not as a finished doctrine, not as a recommendation, and certainly not as a claim of certainty, but as a planning concept grounded in simple logic.
The framework was straightforward.
When the market appeared to be in a reasonably healthy intermediate-term trend, spending would be sourced from equities.
When the market appeared meaningfully weaker, spending would shift toward fixed income.
The purpose was not to predict what markets would do next. It was not tactical asset allocation in the conventional sense, nor was it an attempt to call tops and bottoms. The portfolio itself remained allocated. What changed was simply which sleeve funded withdrawals, based on a modest, rules-based framework.
For the purposes of preliminary testing, we used a simple signal: the 10-week moving average of the S&P 500. If the market closed above that moving average for two consecutive weeks, withdrawals would be sourced from equities. If it closed below for two consecutive weeks, withdrawals would be sourced from fixed income. If fixed income reserves were depleted, withdrawals would default back to equities. The rule required confirmation precisely because markets are noisy, and reacting to every short-term move would likely create more confusion than clarity.
Was the 10-week moving average chosen because it was mathematically optimized?
No.
It was selected because it offered a reasonable, intuitive proxy for intermediate-term trend—long enough to smooth out some short-term noise, yet short enough to remain responsive to meaningful shifts in market direction. Further study may reveal that alternative lookback periods are more robust. That is entirely possible. But for exploratory analysis, it represented a fair and understandable starting point.
Then came the larger question:
Would this seemingly modest change in withdrawal sourcing meaningfully alter long-term retirement outcomes?
To explore that question, we used AI-assisted tools to help organize historical market data, build the model framework, and test assumptions. We believe the calculations are directionally reasonable, but because artificial intelligence assisted in the analysis—and because any model is only as sound as its assumptions—this work may contain errors, simplifications, or flaws that further review could uncover. That is important to state plainly.
This is an initial study and analysis based on our professional studies and knowledge of market trends and cycles, not finished scholarship.
Still, it was designed with objective attitude thoughtful breadth.
The model examined 33 rolling retirement start dates, beginning in 1957 and continuing annually through 1989, with each retirement modeled over a 30-year horizon. That span includes a remarkable range of market environments: inflationary shocks in the 1970s, deep equity drawdowns, the bursting of the technology bubble, and the financial crisis of 2008—periods that tested even disciplined investors. Historical breadth does not make conclusions predictive, but it does make them more worth examining.
The outcome is listed in chart with accompanying data in spreadsheet below.
We compared three frameworks:
A traditional 60/40 portfolio withdrawing proportionally from both equity and fixed income sleeves.
A dynamic withdrawal framework beginning at 50/50.
And a dynamic withdrawal framework beginning at 60/40—an apples-to-apples comparison against the conventional 60/40 benchmark.
For simplicity, fixed income was modeled at a steady 4% annual return, compounded weekly. Equity returns reflected price movement in the S&P 500 only, excluding dividends. Withdrawals were fixed at $40,000 annually from a $1,000,000 starting portfolio, distributed weekly. No taxes were modeled. No fees were modeled. No inflation adjustments were modeled. No rebalancing was assumed. These are meaningful simplifications, and each could materially affect real-world results.
They limit the strength of any conclusion.
And yet—even with those limitations—the preliminary findings were difficult to ignore.
In the 60/40 comparison, the dynamic withdrawal sourcing framework produced a higher ending portfolio value in 25 of 33 modeled retirement periods, or roughly three out of four historical retirements tested. Under the assumptions used, the average ending value advantage was approximately $60,765, with a median advantage of roughly $37,738.
In some retirement paths, the gap was meaningfully wider; in others, the conventional approach modestly outperformed. The range of outcomes varied materially across historical periods, which is precisely what one would expect in honest testing.
The data from our analysis and spreadsheet is here: retirement_withdrawal_strategy_comparison_3_scenarios (1).xlsx
That does not establish superiority.
It does not prove the concept.
And it certainly does not suggest future markets will behave the same way.
But it does raise a thoughtful possibility:
The sequence from which retirees source withdrawals may be a more important planning variable than conventional retirement frameworks typically acknowledge.
Not because it changes what is owned.
But because it may change how pressure is placed on what is owned over time.
That distinction is subtle.
Yet subtle distinctions are often where meaningful planning lives.
There was another interesting observation as well: the dynamic 50/50 version did not produce the same favorable results. That matters because it suggests the observed differences were not simply the result of using a dynamic rule alone. Portfolio construction still mattered. Starting allocation still mattered. In other words, withdrawal design appears to interact with broader portfolio architecture—not replace it.
That is exactly the kind of nuance thoughtful investors should want to see.
Simple narratives are seductive.
Reality is usually more layered.
And layered thinking is often where better questions begin.
If there is a central lesson in all of this, it is not that a moving average is magical.
It is not that a simple rule can somehow tame markets.
And it is certainly not that a preliminary historical model—especially one built with simplifying assumptions and AI-assisted calculations—should be mistaken for a finished blueprint for retirement success.
That would be the wrong lesson entirely.
The deeper lesson is quieter, and perhaps more important:
Retirement income deserves more thoughtful design than it often receives.
For all the sophistication that typically goes into building wealth—asset allocation, tax strategy, estate planning, diversification, risk management—it is striking how often the distribution phase is reduced to broad rules of thumb.
Withdraw 4 percent.
Spend proportionally.
Hold a few years in cash.
Refill the bucket.
Repeat.
These are not foolish ideas. Many are grounded in practical wisdom. For some households, they may be entirely appropriate.
But thoughtful investors should be comfortable asking a larger question:
Is there a better way to think about income design?
Not universally better.
Not guaranteed to produce better results.
Not simpler for every family.
Just…better aligned with the complexity of real life.
Because retirement is rarely static.
Markets shift. Inflation changes the meaning of money. Tax laws evolve. Spending patterns rise and fall. Health changes. Family priorities change. Opportunities emerge unexpectedly. Risks arrive uninvited.
A retirement income plan, ideally, should be robust enough to recognize that reality—not merely survive it, but thoughtfully adapt to it.
That is where this preliminary analysis becomes interesting.
Not because it offers answers.
Because it may sharpen the questions.
For example:
Should withdrawals be sourced differently depending on prevailing market conditions?
Should retirees think of fixed income not merely as ballast, but as strategic spending reserve capital?
Should income planning be designed in concert with tax brackets, Roth conversion windows, capital gains management, Social Security timing, required minimum distributions, and healthcare subsidy planning?
Should portfolio construction itself be built not simply around risk tolerance—but around how assets are expected to function as sources of retirement income?
These are thoughtful planning questions.
And thoughtful questions tend to lead to better decisions.
That is, in many ways, the true value of this exercise.
Not proving a model.
Illuminating a planning blind spot.
There is also something refreshing—perhaps even liberating—about recognizing that meaningful financial insight does not always come from finding a better investment.
Sometimes it comes from better structure.
Better sequencing.
Better coordination.
Better judgment.
The underlying logic explored here is simple enough to understand:
If one portion of a portfolio is under less immediate pressure to be sold during weaker market conditions—and another portion can reasonably fund spending instead—that flexibility may matter over long stretches of retirement, depending on circumstances, assumptions, and implementation.
That is not a dramatic claim. It is simply a thoughtful one. And thoughtful ideas deserve honest exploration. Of course, humility is essential. This analysis has meaningful limitations.
The fixed income assumption was simplified. Real bonds fluctuate. Interest rates change. Inflation changes everything. Taxes matter. Fees matter. Rebalancing decisions matter. Dividends matter. Behavioral implementation matters. The model itself may contain errors. Further independent validation is warranted. Alternative testing methods may reveal different conclusions.
Future markets will almost certainly differ from past markets.
No thoughtful fiduciary should pretend otherwise.
But uncertainty cuts both ways.
It is possible this framework proves less useful than preliminary results suggest.
It is also possible that deeper testing—using more refined assumptions, tax-aware implementation, realistic bond modeling, and broader market data—uncovers insights that are even more useful than this first analysis indicates.
That is worth examining.
Because the stakes are meaningful.
A modest improvement in retirement portfolio durability, spending flexibility, or capital preservation—if achieved thoughtfully and prudently—can ripple outward in deeply human ways:
More confidence to retire when you are ready.
Greater comfort spending on experiences while health is good.
More generosity toward children or grandchildren.
Greater resilience when markets become difficult.
Less quiet anxiety.
More freedom.
And ultimately, that is what good financial planning is meant to support.
Not spreadsheets for their own sake.
Not elegant models admired from a distance.
A life well lived.
At Parkmount Financial Partners, this is how we think about planning: not as a collection of products or formulas, but as the thoughtful design of a financial life—one that seeks to integrate investment strategy, tax planning, retirement income, and human priorities into a coherent whole.
Sometimes that means using familiar tools in disciplined ways.
Sometimes it means questioning conventional assumptions.
And sometimes it means being willing to explore ideas that sit just outside conventional wisdom—carefully, honestly, and with intellectual humility.
If you are approaching retirement—or already living from your portfolio—it may be worth asking a different question than most investors ask:
Not simply: “Am I invested appropriately?”
But:
“Is my retirement income designed thoughtfully?”
That is a richer question.
And in many cases, it may be the more important one.
If that conversation would be valuable, we invite you to schedule a complimentary retirement income consultation with Parkmount Financial Partners.
Click Here for Free Consultation: https://www.parkmountfinancial.com/free-consultation-schedule
And for those who prefer to examine ideas directly, we are happy to share the preliminary methodology and spreadsheet framework behind this analysis so you can review the assumptions for yourself.
Because good planning should never ask for blind trust.
It should invite thoughtful scrutiny.
And from thoughtful scrutiny, clearer decisions often follow.
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