Retirement researcher Stefan Sharkansky explains why the 4% rule often leaves retirees underspending — and how a more flexible, math-driven approach can lead to a better retirement experience.

For decades, the 4% rule has been treated as a gold standard for retirement spending. In fact, I made video about it on my YouTube channel. If you ask most retirees how much they can safely spend, the conversation quickly turns to probabilities, simulations, and avoiding failure.

But what if the real risk isn’t running out of money — it’s not using it well?

In this episode of Retire Today, I’m joined by Stefan Sharkansky, whose background in math and computer science led him to question how retirement spending strategies are actually designed — and what they optimize for.

As Stefan put it plainly, “Under the average market scenario, following the safe withdrawal rate of 4% would leave you with more when you passed away than when you started.” In other words, many retirees are leaving too much money on the table in their retirement spending plan.

The Problem With “Safe” Withdrawal Rates

Most retirement spending research focuses on one outcome: not running out of money.

Advisors often present plans as probabilities — a 90% or 95% chance of success — where “success” means the portfolio never hits zero. But this framing runs the risk of missing what retirees actually care about.

After all, if you have a 90% probability of success, what that really means is that 89% of the time, you could have spent more.

That insight flips traditional planning on its head. Instead of asking, “What’s the safest amount I can withdraw?” the better question becomes, “What level of spending lets me live well — while staying adaptable if conditions change?”

Why Retirement Spending Isn’t Constant

One major flaw in the 4% rule is the assumption that spending stays flat year after year. Real life doesn’t work that way.

Spending often starts higher in early retirement with travel and experiences, dips in later years, then rises again due to healthcare needs. Taxes also change as retirees shift between taxable accounts, IRAs, and Roth accounts.

As Stefan noted, “This idea of constant spending never exists in the real world.”

Any retirement spending plan that assumes otherwise is solving the wrong problem.

A Salary-and-Bonus Approach to Retirement

Stefan’s research introduces a different framework — one that mirrors how people actually lived during their working years.

He described a model where retirees create:

A stable, inflation-protected income base using Social Security and a ladder of TIPS (Treasury Inflation-Protected Securities)
A variable ‘bonus’ income driven by long-term stock performance

“You have your salary from Social Security and your TIPS,” Stefan explained, “and then you get a bonus based on how the stock market does.”

In strong markets, spending can increase. In weaker years, spending adjusts — while working to help maintain long-term security. The key is that adjustment is assumed, not treated as failure.

Rethinking Risk Tolerance

Traditional risk tolerance focuses on portfolio volatility — how much account values swing up and down. Stefan argues retirees should think differently.

“Risk tolerance should be about how much variability in income you’re comfortable with,” he said, “not just what percentage of stocks and bonds you hold.”

Some retirees prefer a higher guaranteed income floor with less variability. Others are comfortable with more income fluctuation in exchange for higher long-term spending. The right plan aligns income stability with personal preferences — not arbitrary rules.

Why This Matters

Many retirees say the 4% rule “doesn’t work for them” — not because it’s unsafe, but because it doesn’t generate enough income to support the life they want.

Stefan’s research shows that when you plan for flexibility, rather than perfection, you can often spend more, not less — while still maintaining control.

The goal isn’t to maximize your ending balance. It’s to maximize your retirement experience.

Ultimately, you need to make your retirement spending plan in a way that not only is within your means, but meets your retirement goals.

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About the Author:

Jeremy Keil, CFP^®, CFA is a retirement financial advisor with Keil Financial Partners, author of Retire Today: Create Your Retirement Income Plan in 5 Simple Steps, and host of the Retirement Today blog and podcast, as well as the Mr. Retirement YouTube channel.

Jeremy is a contributor to Kiplinger and is frequently cited in publications like the Wall Street Journal and New York Times.

Additional Links:

Buy Jeremy’s book – Retire Today: Create Your Retirement Master Plan in 5 Simple Steps
Is the 4% Rule Outdated? New Research Reveals the TRUTH – Mr. Retirement YouTube Channel
Stefan Sharkansky on LinkedIn
TheBestThird.com

Connect With Jeremy Keil:

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