Constant Percentage Withdrawal: A Self-Adjusting Alternative to the 4% Rule

The 4% rule withdraws the same real dollar amount every year, regardless of how the market performs. That predictability is appealing, but it has a well-known weakness: a string of bad early returns can permanently damage a portfolio's chances of lasting the full retirement. Constant Percentage Withdrawal takes a different approach entirely.

The Rule

Each year, withdraw a fixed percentage of your current portfolio balance — not a fixed dollar amount, and not a percentage of your original balance. If your portfolio is worth $1,000,000 this year, a 4% constant-percentage withdrawal takes $40,000. If the market has a rough year and your balance falls to $900,000, next year's withdrawal drops to $36,000 automatically.

Why It Can't Deplete Your Portfolio

Because the withdrawal is always a fraction of the remaining balance, the balance can decline but mathematically cannot reach exactly zero at any withdrawal rate under 100%. There is no depletion scenario of the kind the 4% rule is tested against. Consequently, a success-rate metric does not apply to this method in the same way.

The Real Tradeoff: Income Variability

The consequence is that annual income varies with market performance. Consecutive down years reduce the available amount materially, and no minimum applies. This is the inverse of the 4% rule's tradeoff, which holds income stable while accepting depletion risk.

Constant percentage withdrawal tends to suit retirees who:

• Have flexible spending (can cut back in lean years without hardship)
• Value never fully depleting their portfolio over predictable income
• Are comfortable seeing their withdrawal amount swing meaningfully year to year

Try It Yourself

The spend-down step runs this strategy through thousands of simulated market scenarios and reports the percentile range of the resulting annual withdrawals.