Sustainable Withdrawals Aren’t a Math Formula, They’re a Governance Challenge

Most retirees encounter the same idea early on: if you withdraw about 4% of your portfolio each year, adjusted for inflation, the odds are you won’t run out of money over a 30-year retirement. 

It’s tidy. It’s reassuring. And for a long time, it sounded close enough to true. 

But for many Bay Area retirees today, that framework creates a false sense of security. Not because people are reckless spenders, but because the problem it tries to solve has quietly changed. 

Retirement income used to be framed as a calculation problem: find the right number and stick to it. Today, it’s far more accurately described as a governance problem: how withdrawals are managed over time, across different markets, tax regimes, and life events. 

The core assumption behind the “safe withdrawal rate” is that sustainability can be decided once, at the start of retirement. Pick the right percentage, apply discipline, and the rest is execution. 

That assumption rests on several others: 

• Markets cooperate over long periods.
• Inflation behaves reasonably.
• Spending needs don’t shift dramatically.
• Taxes are manageable with basic sequencing.
• Human behavior remains steady under stress. 

In real retirements, especially in the Bay Area, those conditions rarely line up so neatly. 

Sequence-of-returns risk is the most obvious flaw. Two retirees can earn the same average return over 30 years and end up in very different places if one experiences a major downturn early and the other does not. The withdrawal rate itself isn’t what causes failure. It’s the insistence on treating withdrawals as fixed when everything else is variable. 

The persistence of the 4% rule has less to do with its precision and more to do with how it feels. 

A single number offers psychological relief. It gives retirees something to hold onto when markets feel abstract and uncertain. It also makes advice easier to deliver, clean, decisive, and confident. 

But simplicity can become a liability when it discourages judgment. Many retirees don’t get into trouble because they overspend in good years. They get into trouble when markets decline, confidence erodes, and there is no shared framework for how spending should respond. 

At that point, decisions become reactive. And reactive decisions are rarely optimal. 

In our experience, retirees who maintain spending confidence through different markets don’t rely on a fixed rule. They rely on a system. 

That system usually includes several elements. 

First, spending flexibility is defined in advance.
Not in vague terms, but explicitly. There is a range within which spending can adjust modestly without threatening lifestyle or dignity. This avoids the all-or-nothing reactions that often follow market declines. 

Second, money is assigned roles, not just allocations.
Assets meant to fund near-term spending are governed differently than assets intended for long-term growth. This reduces the pressure to sell volatile investments at the wrong time and reframes downturns as manageable rather than catastrophic. 

Third, taxes are treated as a primary constraint, not an afterthought.
For many Bay Area retirees, the difference between a sustainable and an unsustainable plan is not investment performance. It is tax drag. Coordinating withdrawals across taxable accounts, IRAs, Roth assets, and future RMDs materially changes outcomes, especially under California’s tax regime. 

Fourth, downside scenarios are taken seriously.
Plans that only model “average” returns tend to fail quietly. More resilient plans ask uncomfortable questions up front: What happens to spending if markets are down 20%? Which assets are used first? What does not change, even then? 

Finally, oversight is periodic, not obsessive.
Good governance doesn’t require constant adjustments. It requires structured reviews tied to decision thresholds, not headlines. 

Bay Area retirees often arrive at retirement with complexity baked in: 

• Large taxable portfolios from liquidity events.
• Concentrated equity positions that linger longer than ideal.
• Long life expectancies.
• High fixed costs, especially around housing and healthcare.
• A tax environment that penalizes poor coordination. 

A static withdrawal rule ignores these realities. An adaptive framework accommodates them. 

If your goal is to sustain withdrawals across very different market environments, a few shifts matter: 

Stop anchoring on a single “safe” percentage.
Start focusing on how withdrawals adjust when conditions change. 

Rethink the idea that discipline means rigidity.
In retirement, discipline often means knowing when not to follow a preset rule. 

Start stress-testing behavior, not just portfolios.
Ask what you would actually do if markets decline early, and whether your plan supports that response. 

Address future tax events before they force decisions.
RMDs, capital gains, and Medicare premiums interact in ways that compound if ignored. 

Separate flexibility from fragility.
A plan that can bend slightly is far more resilient than one that promises certainty but cannot adapt

Retirement income doesn’t fail because someone chose the wrong withdrawal rate. It fails when there’s no agreed framework for making decisions once conditions change. 

You don’t need to predict markets or longevity with precision. You need a system that holds together when markets disappoint, taxes intrude, or life intervenes, one that balances flexibility with restraint, and judgment with structure. 

This is where experience matters. At Summitry, we’ve learned that sustainable withdrawals emerge from coordination, not optimization. Investments, taxes, estate planning, and healthcare decisions cannot be governed in isolation without creating hidden risks elsewhere. 

If there’s a useful next step, it isn’t changing strategies. It’s taking a closer look at how your withdrawal approach would function in a tougher market and whether the pieces around it truly work together.