If there is one question that nearly every single client wants to know, it is: Do I have enough to retire?
It is the question that keeps people up at night, has them agonizing about when the right time to retire is, and contemplating how much they can safely withdraw from their portfolio without running out of money.
At its heart, this is what a financial plan answers. It’s an analysis of your current expenses, goals (the vacations, renovations, new cars, etc.), how long of a runway you need (life expectancy), and how successful you will be even when faced with a few curveballs in life (health events, loss of a spouse, market corrections, etc.). We run all the numbers and tell someone, to what degree of certainty and at what age, they can throw in the towel and retire.
Now, one important element of that output is the phrase “to what degree of certainty.”
A million dollars used to sound like a lot of money, but there is a rule called the Monte Carlo, or 4% Rule. This essentially says that you can safely withdraw 4% of your portfolio value and have a 90% chance of not running out of money. If you had $1,000,000, that is only $40,000 per year.
The problem with this is that even if you follow the 4% Rule, one out of every ten people still runs out of money. People are also living longer and longer, which means that money needs to last longer and longer. As a result, some argue that it’s really the 3.7% Rule now.
Ideally, you want your withdrawal rate to be as low as possible. As a rule of thumb, we target 2%, or $20,000 per million per year.
If you have some guaranteed income sources like a pension or Social Security, you need to know how much of your living expenses that monthly guaranteed income covers. For most people, it isn’t even half. This is where we start to work on strategies to fortify our clients’ retirement income and, most importantly, their financial security.
Right now, one strategy that is extremely effective due to the high-inflation environment is securing income annuities. Just like buying a bottle of wine, the vintage matters, and right now is a wonderful time.
The withdrawal rates on these are the highest they have been in ten years. The withdrawal rates have gone up from 7.1% to 7.6% in just the last six months (Source: MarketWatch article¹). The other benefit to these contracts is that the income is guaranteed for your lifetime.
Now remember that 4% Rule?
How great would it be to nearly double that withdrawal rate without ever being worried about running out of money or having your withdrawal rate decrease when the market tanks?
If you take a portion of your portfolio and allocate it toward guaranteed income that you know will be enough to cover your living expenses, then you can also afford to be more aggressive with the rest of your portfolio for your long-term assets—if, and it’s a big if, you want to.
The best part is that if your living expenses are covered (gas, groceries, utilities, etc.) by Social Security and guaranteed annuity income, then the sole purpose of your portfolio is to keep up with inflation, which would result in a very modest withdrawal rate—if you even need one at all for the first several years.
After that, it’s simply there to generate fun money.
Hello, French Riviera.
Now, you also need to work with a financial professional to ensure that you have planned for potential healthcare events or long-term care needs, determine what your magic number is, and identify which carrier and product are right for you (think make and model).
If you are looking for peace of mind and the best bang for your buck, then this is a great time to explore this strategy.
¹ MarketWatch (May 21, 2026). “Annuity Payouts Are the Highest They’ve Been in Years” by Brett Arends.
Past performance is never indicative of future performance. This is not advice, but educational information. Please consult a financial advisor before implementing any investment strategy to ensure it is aligned with your financial plan.
Securities and advisory services offered through Packerland Brokerage Services Inc., an unaffiliated entity. Member FINRA & SIPC.
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