How to build a flexible, tax-aware income plan from your retirement savings that adapts to markets, manages risk, and helps your savings last.
“How long will my money last?” is one of the most pressing questions we hear from clients approaching retirement. It’s simple, sobering, and a valid concern. After all, we can measure the length of childhood, adolescence, and, say, our 40’s, but retirement is an unpredictable phase of life with the potential to span 20 to 30+ years.
When it comes to saving for retirement, two principles matter most: Start early and save consistently. Why? Monthly contributions put the magic of compounding to work, steadily growing your investments over time.
But without a smarter, more strategic withdrawal plan from those investments when you’re ready for it, even sizable portfolios can fall short. Poor early-retirement returns, avoidable taxes, and unplanned spending shocks can erode purchasing power faster than expected.
Many people rely on withdrawal calculators (like ours!) or the 4% rule for a quick pulse-check on how sustainable their savings might be. Those numbers are useful but incomplete because they miss key factors that determine your portfolio’s longevity, and how you adjust spending when conditions change.
In this article, we’ll explain why basic retirement withdrawal calculators are just a starting point, and the topics you need to make decisions about in order to create a tax-efficient, risk-aware retirement withdrawal strategy that can protect your wealth so you don’t have to worry about running out of money.
- Why Basic Retirement Withdrawal Calculators Fall Short For Income Planning
- Key Risks to Retirement Income
- Building a Retirement Withdrawal Strategy That Lasts
- How HWM’s Tax-Aware Portfolio Design Protects Retirement Income
- Retiring With Confidence: Preserve Your Savings and Legacy
- Frequently Asked Questions
Why Basic Retirement Withdrawal Calculators Fall Short For Retirement Income Planning
Most online retirement calculators (ours included) are a great place to start in getting a baseline assessment of where you’re at for retirement, but simplify their assessments by assuming smooth growth, fixed annual withdrawals, and leaving out taxes.
Of course, that’s not how real life works. Real life is much more complex, and most investors find that a static retirement calculator falls short when the stock market declines or plans have to change.
Retirement is full of choices and curveballs despite even the most meticulous of planning. You might decide to help an adult child with a down payment on their first home, take a once-in-a-lifetime trip, or seed a passion project. You could also face less welcome surprises: a health event, caregiving for a parent or loved one, an unexpected divorce, relocation, or tax-law changes that alter your take-home income.
A financial plan that’s flexible on retirement withdrawals, efficient regarding taxes, and intentional in its portfolio design gives you room to say “yes” to what matters–and adapt when life shifts.
At Hendershott Wealth Management, we look beyond simple projections with our clients because our planning covers everything your money touches. Our approach takes a holistic, big picture view of your life and what you want to experience–then we center planning around that vision.
Numbers do matter, so we start by calculating your Annual Spending Number (ASN), which is the dollar amount your portfolio needs to produce each year to fund your lifestyle and pay your taxes. While some articles will cite that people tend to spend about 70% of what they spent during their working years, it’s been our experience with clients that people tend to keep spending what they were spending before they retired.
Your ASN is important to get specific with, because it becomes the anchor for everything else: the amount of risk we decide to take in the portfolio (because reward follows risk—if you’re doing it right), withdrawal order, Roth-conversion timing, RMDs, Social Security coordination, and tax-aware asset location. Every decision ties back to what you’ll actually need for spending.
Confidence comes from clarity. When you know your financial plan can flex and flow with the unknown, you can spend less energy worrying and focus on living well.
Discover your Annual Spending Number
Inside our guide, How Close Am I to Retirement?
, we walk you through two ways of using your current spending to calculate your Annual Spending Number—and give you four crucial follow-up steps to adjust your current spend for what your ASN might actually be in retirement.
Is it worth 15 minutes of dreaming (and a bit more math) to get even more targeted in your retirement savings goals? We say yes.
Download the free guide today!
Three Key Risks to Retirement Income
Your ASN is the starting point for figuring out what you need to be able to comfortably retire. What you’ll also need to consider in your planning are the risks that the retirement fund you build up faces. How much control you have over these things varies—but the more you’re aware of them, the more you can work with your financial planner to plan for them.
To ensure your money lasts, there are a few core risks your retirement fund faces that you can proactively plan for and manage:
Sequence of returns risk. Sequence of returns risk is the danger that a market downturn early in your retirement erodes your nest egg’s longevity.
In simple terms, withdrawals during a bear market will cost you more in the long run than the same withdrawals in a bull market. What to do if you are suffering a bear market in the first years of your retirement is very much a game time series of decisions, and one that your fiduciary financial planner can guide you through.
But here’s what you need to know: The order of investment returns matters once you start withdrawing money from your retirement funds. A lot.
Not consciously adjusting your withdrawals during a market downturn can force sales at lower prices, erode your principal, shrink future gains from compounding, and permanently impact future spending.
Tax drag. If much of your retirement income will come from tax-deferred accounts—i.e. traditional IRAs or 401(k)s—remember that withdrawals will be subject to income tax, so you may need to adjust your withdrawal rate to cover that tax bill.
The risks of not having a tax-efficient retirement withdrawal strategy are real: You may get pushed into higher income brackets, and you’ll likely see that taxes can consume a significant share of your retirement income.
Most of our clients have multiple retirement income streams, like 401(k)/IRA/Roth withdrawals, Social Security, pensions, taxable investments, and more. A good portion of our Ultra Tax Efficient Wealth Management® approach includes optimizing the order, amount and timing of withdrawals, and deferring their capital gains taxes through a sophisticated tax-aware long-short strategy to mitigate the tax burden they face.
Tax optimization is one of the best—and most underutilized ways—to make your money last longer. Factoring in taxes now keeps them from eating into your spending power later. And when you minimize your taxes in retirement? That money you would’ve paid compounds.
Inflation. Over a 20-30 year retirement, even modest or “normal” inflation (historically about 2-3% per year) quietly reduces your purchasing power.
For example, assuming a 2.5% inflation rate, an annual budget of $100,000 today would need to grow to about $128,000 in 10 years just to have the same purchasing power.
Your portfolio needs to earn enough to keep up with inflation plus cover your withdrawals in both positive and negative stock market years.
If you’re 5–15 years away from retirement, project how inflation could bump up your ASN by the time you retire–and plan for it.
The risks to your retirement portfolio don’t end there—we cover a few others in depth in our free Retirement Guide—but now, let’s talk through the basics of smart retirement withdrawal strategy so that your money can sustain that ideal retirement you’ve plotted out for yourself.
Building a Retirement Withdrawal Strategy That Lasts
You’ve dreamed about what thriving in retirement would look like. You’ve determined the Annual Spending Number and saved to be able to hit it. And now, it’s what we consider the most important day of your financial life: Your retirement day.
When done right, this is the day of true financial freedom… when you no longer have to work because you need to, but you can if, and only if, you want to.
And it truly is a big day, because from the day you stop building your nest egg and start spending it, your retirement withdrawal strategy is what’s going to determine how far your money can go.
Effective withdrawals require more than simple rules of thumb or percentages. You may have planned around a general 3% or 4% withdrawal rate, but you need a coordinated, customized withdrawal strategy that can be adjusted to suit every market condition and curveball that might be thrown your way.
Here are a few considerations our team keeps top of mind when we’re helping our clients create a plan for withdrawals. We’re not diving into full-blown strategy here—because each and every client we work with has a savings and withdrawal strategy that’s custom to their circumstances and ideal lifestyle—but here’s a brief overview of some of the things you may want to think about:
1. Prioritize withdrawal order, particularly based on tax-awareness
- Consider spending from taxable brokerage accounts first to allow tax-advantaged accounts to keep growing
- Work with your CFP® professional to employ strategic gain/loss management through advanced strategies like tax-aware long-short to minimize taxes owed and keep your money compounding
- Time IRA/401(k) withdrawals wisely, adapting as tax laws evolve and keeping Required Minimum Distributions (RMDs) in mind
2. Use flexible spending strategies or guardrails
- Be willing to raise or reduce withdrawals to adjust during various market cycles instead of rigidly withdrawing the same dollar amount annually
- Guardrails-based spending—a strategy that sets specific upper and lower limits (your guardrails) on how much can be withdrawn or spent from your investment portfolio, adaptable based on market conditions—helps you manage your retirement income intentionally and systematically, not emotionally
3. Incorporate Strategic Roth Conversions
- Convert pre-tax retirement assets in years you have low taxable income to reduce future tax liabilities and create more flexibility for later
- Model pre-RMD withdrawals/conversions to avoid tax bracket spikes and Medicare IRMAA surprises
Retirement is a major life stage, not a single transaction, and your financial security shouldn’t be left to chance.
That’s why our team puts so much care into planning upfront as well as ongoing support–and why partnering with a professional matters when you’re navigating milestones of this scale.
As your financial advisory team, we can help design, implement, and adapt your withdrawal strategy over time, adjusting guardrails and mitigating emotional decision making when markets are volatile.
We can also coordinate the complex moving parts of your plan so your income lasts longer, you don’t end up with surprise bills at tax time, and you don’t make avoidable mistakes that sabotage your financial security.
Your withdrawal plan only works if the portfolio behind it is built and managed to fund spending through many market cycles.
How HWM’s Tax-Aware Portfolio Design Protects Your Retirement Income
At Hendershott Wealth Management, we help clients build tax-aware retirement income strategies. That means:
Broad diversification. We invest across thousands of U.S. and international stocks, and high-quality bonds. Our clients own upwards of 12,000 stocks in their portfolios. This reduces single-stock, sector, and home-country concentration risks and helps smooth returns.
Proper diversification effectively eliminates the chances that one position, industry, sector, or event can derail your plan. It does not eliminate market risk.
Right-sized market risk. We align your stock/bond mix to your Annual Spending Number (ASN), time horizon, and risk capacity.
The goal is to reduce the pressure to sell at unfavorable prices during down markets, and help you stay on target through volatility.
Minimize liquidity risk. Liquidity risk is the risk that your money is tied up in an investment and not readily available when life requires flexibility. This risk can be associated with alternative investments, private equity investments and even some individual bonds.
At HWM, we avoid liquidity risk by only selecting investments for client portfolios that consistently offer overnight liquidity.
Disciplined rebalancing. Instead of guessing at market performance, and especially in tax-deferred accounts, we follow strategic calendar/threshold rules when it comes to harvesting recent outperformers in order to keep the account within the parameters we’ve designed.
This avoids trying to time the market, limits the sale of depressed assets, and keeps the portfolio aligned with your plan.
Withdrawal sourcing & conversions. We coordinate taxable, tax-deferred, and Roth distributions with tax bracket management, RMDs, Social Security timing, and Medicare IRMAA thresholds.
Retirement withdrawals can disqualify you for ACA subsidies or trigger IRMAA increases in Medicare premiums, which can absolutely be a tradeoff worth making, but if you haven’t planned for these outcomes they will result in unexpected bills that shrink your after-tax retirement income.
Tax-aware construction. We implement our proprietary Ultra Tax Efficient Wealth Management® (UTEWM®)—including a tax-aware long-short strategy for suitable investors—to reduce tax drag from realized gains and keep more of your returns compounding.
This is one the best (and perhaps most underrated) ways to keep more of what you earn working toward your goals, and gain the confidence to make choices on your terms—without avoidable tax surprises.
Every component of the tax-aware long-short strategy is engineered for balance, consistency, and maximized tax efficiency–whether the market is up or down—and mitigating your tax burden is the single-most underrated way to keep more of your money compounding over the long term.
We’ll help you approach it deliberately—so more of your effort shows up in your future spending power, and less of your spending goes to unexpected (and often unavoidable!) tax bills.
Learn more about TALS + how it can work behind-the-scenes in your portfolio to keep your taxes minimized and your wealth last longer:
Read the articlel
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Watch the video series
Retiring With Confidence: Preserve Your Savings and Legacy
Many financial advisors employ a “capital utilization model” in retirement planning, where they help clients decide ahead of time how long their life span is and plan to spend their assets down over that time. In contrast, at Hendershott Wealth, we prefer a “capital preservation model.”
Medical science has made significant improvements, meaning people are living longer and longer—which, of course, is great, but can create a problem when it comes to money. In the “capital preservation model”, we plan for our clients to spend only the earnings from their nest eggs, leaving the principal intact. In fact, many of our retired clients actually see their initial investment grow—even when they are retired and paying themselves from it.
Of course, when it comes to your retirement, guesswork is completely unacceptable. Guesswork won’t lead to confidence, and we want you to experience the peace of mind that comes from knowing your financial plan is evidence-based, fully stress tested, and designed to adapt to the upcoming (and unknown) changes in your life—however long it is—so you can enjoy the fruits of your labor and the freedom of retirement.
In our experience helping women (and the people that love them!) navigate retirement, a diversified, tax-aware portfolio is a key component of a sustainable withdrawal strategy that aims to support your lifestyle and goals.
Retirement readiness isn’t built on guesses or following rigid rules—it’s built on a plan that gives you clarity on what you can spend, how your portfolio will fund that lifestyle across cycles, and which actions keep more of your returns compounding.
With a strategic plan that includes guardrails and a coordinated withdrawal order based on your circumstances, you can retire with confidence instead of reacting to headlines because you’re following a clear playbook designed to preserve spending power and reduce regrets at tax time.
Our role is to monitor, adjust, and keep your investments, taxes, and cash flow working in sync—so you can focus on what matters most.
You’ve worked hard to build your wealth. Now let’s make sure it lasts.
Schedule a Discover Meeting
with a Hendershott Wealth advisor to see what’s possible in retirement. We’ll walk through your numbers, clarify next steps, and help you build a flexible withdrawal plan designed to weather markets, reduce taxes, and support the life you want to live.
Get started today!
Retirement Resources
- Try | Retirement Calculator
- Download | Retirement Guide
- Read | Can I Retire at 55? What High Earners Need to Know About Early Retirement
- Read | Personal Retirement Planning: A Fiduciary Guide to Knowing When You Can Retire
- Read | The Entrepreneur’s Guide to Saving for Retirement: SEP IRAs, Solo 401(k)s, and Tax-Smart Strategies
Frequently Asked Questions
How long will my money last in retirement?
It depends on your spending, taxes, investment returns, inflation, and the order of market returns. Start with a baseline using our retirement withdrawal calculator for a monthly income estimate, then model a flexible plan (with guardrails, tax-aware withdrawals, and a cash reserve) to see how longevity changes under different market and tax scenarios.
What is a retirement withdrawal calculator and how should I use it?
A retirement withdrawal calculator is a tool that projects a future nest egg balance and potential income from your current savings, contributions, time horizon, and an assumed growth rate. Use it for a quick estimate, then pressure-test results with a plan that incorporates taxes, RMDs, inflation, and spending adjustments.
Which retirement withdrawal strategies work best in volatile markets?
Strategies that adapt: Keep a liquidity buffer (client and situation dependent), use guardrails to adjust withdrawals up or down, source withdrawals from overweight or appreciated assets, and rebalance on a schedule or threshold. This helps limit selling depressed assets and keeps your plan aligned.
What order should I withdraw from accounts—taxable, traditional IRA/401(k), or Roth?
A typical sequence is: taxable accounts first (manage gains/losses to minimize your tax bill), then distribute from a mix of IRA and Roth accounts depending on your ASN and current tax regime (your net effective tax rate on distributions). The exact order is personal to your plan, and should adapt to markets, ACA/Medicare thresholds and other regulatory environments, and your guardrails. The goal is higher after-tax income over time, not just minimizing one year’s tax bill.
How does sequence of returns risk affect my retirement income?
Poor returns early in retirement can shorten portfolio longevity because you’re withdrawing while values are down. Guardrails, a cash reserve, and disciplined rebalancing are practical ways to reduce that impact.
What are RMDs and how do they impact my taxes and withdrawals?
Required Minimum Distributions are mandatory withdrawals from most pre-tax retirement accounts starting at a specified age. They count as ordinary income and can push you into higher tax brackets. Adjustments—like pre-RMD withdrawals or Roth conversions in lower-income years—can smooth the tax bite.
How does inflation change my Annual Spending Number (ASN) over time?
ASN should rise with costs. For example, at 3% inflation, expenses compound by about 1.806× over 20 years ($100,000 today ≈ $180,611). Your plan should include cost-of-living adjustments and investment growth targets that aim to outpace inflation after taxes.
How often should I rebalance and adjust my withdrawals?
Rebalance on a defined cadence and/or when allocations drift beyond set bands. Review withdrawals at least annually, and adjust within guardrails when markets move materially or when tax rules change.
How can a fiduciary advisor help coordinate taxes, investments, and income?
By building and maintaining a single, coordinated plan: ASN, investment mix, cash reserve, withdrawal order, rebalancing rules, RMDs, and tax planning strategies (tax-loss harvesting, gain realization, charitable gifting to name a few). At Hendershott Wealth, we take tax optimization further for qualified investors with tax-aware long-short investing that mitigates taxes and maximizes wealth. Ongoing monitoring and course corrections help keep more income after tax with fewer surprises.
How does a tax-aware long-short strategy help my money last longer in retirement?
By minimizing what you owe in capital gains taxes through smart tax strategy, a tax-aware long-short strategy keeps more of your wealth compounding over the long run, and can keep working for you, even in retirement.
Disclaimer:
All investing involves risk, including the potential loss of principal. There is no guarantee that any investment plan or strategy will be successful. Advisory services provided by Hendershott Wealth Management, LLC (“HWM”), an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.
All written content in this article is for information purposes only and does not constitute an offer, or solicitation of an offer, or any advice, or recommendation to purchase any securities or other financial instruments–and may not be construed as such. Opinions expressed herein are solely those of HWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
