Creating a Retirement Withdrawal Plan For Any Situation

Jon Guyton is a well-known retirement columnist based in Minneapolis and an expert panelist on retirement for the Wall Street Journal. And it’s Guyton who introduced the concept of a Withdrawal Policy Statement to help guide both advisor and client in navigating a down market.

A Withdrawal Policy Statement is just what its name suggests: a formalized agreement, signed by all parties, that spells out what you’re going to do when the market delivers that punch in the mouth. It’s not a statement of strategies, but an actual action plan. When this happens, we’ll do that. Rather than freezing or reacting to every turn in the new everyday—which can paralyze you—you can turn to a clear plan that defines where your income is going to come from, whether the market is up or down.

The first four elements of a policy statement that Guyton describes are:

1. The income goals your portfolio needs to support;
2. The assets available to meet those goals, including your cash moat;
3. The withdrawal rate needed to meet your goals; and
4. The method you’ll use to determine the source of each year’s withdrawal income.