How to withdraw from your portfolio: a fixed rule or flexible spending?

Why your withdrawal rule matters

The 4% rule assumes a rigid withdrawal: you set the amount in the first year and only adjust it for inflation, whatever markets do. It's simple and predictable, but it's also the most "expensive" strategy: to be safe through the worst periods in history, it has to start low.

In its annual retirement income study, Morningstar puts the 2026 safe starting withdrawal rate at 3.9% for a fixed, inflation-adjusted amount over 30 years with balanced portfolios. The same research shows that people willing to vary their spending with markets can start from noticeably higher rates. The data is American, but the principle holds everywhere: flexibility has value.

The four main strategies

1. Fixed inflation-adjusted amount (the 4% rule)

Pros: stable, predictable income that's easy to manage. Cons: it ignores markets; in good periods it leaves a lot of capital unused, in terrible ones it can run the portfolio dry.

2. Fixed percentage of the portfolio

Each year you withdraw, say, 4% of the current value. Pros: mathematically, you never run out. Cons: your income swings as much as the portfolio: after a 30% fall, your income falls 30%.

3. Guardrails

You start with a higher withdrawal and set two "rails". If the portfolio falls so far that your withdrawal rate exceeds one threshold, you cut; if it rises a lot, you increase. Example with €800,000 and a 4.5% starting withdrawal (€36,000):

Pros: lets you start higher, with cuts that are limited and rare. Cons: it takes discipline and a real willingness to cut spending when needed.

4. Floor and ceiling

Your withdrawal follows the portfolio, but with limits on the yearly change: for example, it can't rise by more than 5% or fall by more than 2.5% from the year before. It's a compromise between stability and adaptation.

The Italian advantage: your pension as a floor

A flexible strategy is much easier to live with if part of your spending is covered by income that doesn't depend on markets. In Italy that income almost always exists: the INPS pension. Once it starts, it covers essential spending, and the portfolio can fund the "variable" part: travel, helping your children, projects. Cutting those in a bad year hurts far less than cutting rent or groceries.

How to choose

• Mostly fixed spending and no pension in sight: a fixed amount at a cautious rate (3–3.5%).
• Largely discretionary spending: guardrails or floor-and-ceiling, with a higher starting withdrawal.
• Early years without a pension: combine your chosen rule with a cash reserve, as in the bucket strategy.

Whatever rule you choose, write it down before you stop working. Deciding it in the middle of a market crash is the surest way to make the wrong call.