Variable Spending Plan
Replace fixed withdrawal rates with course-corrected, lifestyle-aware retirement spending
The classic 4% rule asks you to spend a fixed amount of your starting portfolio every year, inflation-adjusted, until you die. Ben Felix argues this is the wrong frame. When he repeats Bill Bengen's original 1994 analysis using non-US markets and longer life expectancies, the sustainable rate falls to about 2.7-3%, not 4%. But more importantly, no real retiree actually behaves like the rule assumes — they course-correct.
A Variable Spending Plan replaces the fixed-withdrawal model with a lifetime-spending model. You set a target standard of living, separate non-discretionary from discretionary spending, and explicitly plan to throttle discretionary outflows in bad markets and re-expand them in good ones. This recovers a much higher sustainable spending power over a long retirement than a single static percentage suggests.
The framework matters because retirees facing 30-50+ year horizons, lower expected returns, and global (not US-only) portfolios cannot rely on 4%. But they also don't need to over-save to fund 2.7%. The right answer is a flexible plan, not a more conservative fixed number.
- Fixed withdrawal rates assume behaviour no real retiree displays.
- Sustainable spending depends on the markets you actually own, not just US history.
- Longer life expectancies and earlier retirement both compress safe rates.
- Discretionary expenses are the shock absorber for retirement plans.
- Plan for lifetime spending power, not constant annual dollars.
- Re-anchor your safe rate to global, longer-horizon dataDiscard the US-only, 30-year 4% baseline. Re-run the math using globally diversified equity and bond returns and the longest plausible retirement length for your situation. Expect something closer to 2.7-3% as the fixed-rate equivalent.Pro tipUse your actual portfolio's expected return, not S&P 500 backtests.
- Split spending into floor and flexSeparate non-discretionary spending (housing, food, insurance, healthcare) from discretionary (travel, gifts, dining, upgrades). The floor must be funded reliably; the flex layer is where you absorb market shocks.Pro tipIf your floor is more than ~70% of total spend, your plan is fragile — find more flex.
- Define course-correction triggersDecide in advance what portfolio behaviour will cause you to cut discretionary spending and by how much. This avoids panicked decisions later and converts vague 'we'll adjust' into rules.WarningWithout pre-set triggers, retirees often delay cuts too long and spend down too aggressively in bad sequences.
- Plan for lifetime spending, not annual percentageEstimate total spending power over the full retirement window under variable rules, not a flat annual figure. Felix argues this number is materially higher than what a 2.7% fixed rule implies.Pro tipRun the plan against a sequence of bad early returns to see how much flex you actually need.
- Re-test annually and reset the pathEach year, refresh the plan against actual portfolio value and remaining horizon. Variable spending only works if you're willing to adjust both up and down — including increasing spend after good years.Pro tipMost retirees underspend in good markets; explicitly plan upside scenarios so you actually enjoy them.
- Communicate the plan to familyVariable spending changes how kids, partners, and dependents understand commitments like trips and gifts. Make it explicit that some line items are flex, not fixed.
Felix repeats Bill Bengen's 1994 analysis exactly, but with international equities and longer life expectancies. Without even adjusting for currently lower expected returns, the safe rate drops to roughly 2.7%.
Felix describes seeing PWL Capital clients voluntarily skip trips and scale back gifts when markets disappoint, then resume normally when they recover.
Felix produced a YouTube video arguing the 2.7% rule is more honest than the 4% rule once you swap in international stocks and longer life expectancies. At the end of the same video he tells viewers none of it really matters, because fixed withdrawal rates are not how anyone actually lives. He sees this with his own clients at PWL Capital — when markets disappoint, people cut a trip, scale back gifts, defer renovations. He built the variable framing on top of that observed behaviour.