Retirement Retirement Planning

A Surprising Retirement Withdrawal Strategy Could Leave You With More Money Later

This may work best for disciplined investors.

By Josh Koebert , Edited by Laura Hohenstein

Updated Oct. 29, 2026

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Many people follow a fixed withdrawal retirement strategy when it comes to their retirement plans. This may be a 4% initial withdrawal rate, a 3.8% withdrawal rate, or something else. However, there is a surprising retirement withdrawal strategy that could potentially leave you with more money later.

Dubbed a flexible retirement withdrawal strategy, also known as dynamic spending, retirees base their withdrawals on market performance. This means they may withdraw less during down market years.

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How to use a flexible retirement withdrawal strategy

Using a flexible retirement withdrawal strategy requires an active approach to your retirement plans and lifestyle budget. Essentially, if you manage your retirement plan yourself, you would track how well your investments perform and use that information, as well as the overall market temperature, to decide whether or not to withdraw the same amount you did the previous year or adjust it. So, if your portfolio loses value and inflation is higher than normal, you would reduce your withdrawals based on a set of rules you set ahead of time.

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Why people consider a flexible withdrawal strategy over a fixed one

A fixed withdrawal strategy is more straightforward to manage because you decide the percentage of your portfolio you want to withdraw the first year and then adjust based on inflation after that. However, if your first year of retirement falls during a market downturn, it can create what's called sequence of returns risk. That means you may take investment losses early in retirement, which can reduce the money you have for decades to come. Fidelity says that withdrawing money while the market is down can impact how long your investments last.

How specific rules can help your flexible withdrawal strategy be successful

Having a successful withdrawal strategy could be a result of taking the time to plan what happens in a worst-case scenario. For example, you can set a rule, also called a guardrail, that you will reduce your withdrawal by 10% if your portfolio falls 15% or more. Making decisions and rules like this ahead of time can help you avoid getting swept up in the stress of worrying about your nest egg running out if the market falls.

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Steps to take when your portfolio drops

If your portfolio does drop, you can take a few steps to preserve your nest egg. First, you can trim your discretionary spending. For example, keep your essential expenses like your housing, groceries, utilities, and insurance. However, consider cutting things like vacations, entertainment, and eating out during a down market year. Keep in mind that you can always increase your withdrawals once the market picks up and you have a strong year again. It's also wise to set aside a surplus during profitable years to offset any future bad years. Again, having a plan and understanding your unique budget and cash flow is key in navigating a flexible withdrawal strategy in retirement.

Flexible withdrawal strategies work best for retirees with dependable income

A flexible withdrawal strategy might not be best for all retirees. It works best for those who have a dependable income, money set aside for emergencies, and those who can comfortably handle a reduction in withdrawals. It may not be best for those who need to have a set amount in withdrawals every month in order to pay for necessities. Additionally, this type of withdrawal strategy requires discipline. For those who are not comfortable adjusting their own retirement withdrawals year to year, a fixed withdrawal strategy during your first year of retirement may be better.

Multiple withdrawal strategies can help you achieve your goals

Retirees have several withdrawal strategies to choose from, and no single approach works for everyone. The goal is a system that covers your needs while helping your savings last. For many people, a flexible strategy that adjusts spending to market performance can help make that happen.

Work with a financial advisor if you need help with your withdrawal strategy

If you're not sure which withdrawal strategy is best for you, consult with a financial advisor. This person could make recommendations based on your personal risk tolerance, your retirement account balance, and your current expenses. They may also be able to refer you to a tax professional who can help you create a tax-optimized withdrawal strategy too.

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Bottom line

Ultimately, the best way to avoid potentially making a financial mistake with your retirement strategy is to plan ahead of time. Making a withdrawal plan is the single decision that can help you prepare for the next downturn. By deciding what actions you'll take ahead of time if the market dips, you'll be better able to weather the emotional and financial aspects of managing your retirement account for the long term.

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