A fixed withdrawal strategy takes the same nominal amount from your portfolio every month, regardless of inflation or market conditions. It offers maximum simplicity and predictable cash flow, but purchasing power erodes steadily as inflation compounds over a multi-decade retirement.
Fixed withdrawal is a retirement spending strategy where the retiree withdraws a constant nominal amount each month or year, never adjusting for inflation or portfolio performance. If you start withdrawing $3,500 per month, you withdraw exactly $3,500 every month for the rest of retirement.
How It Works
The mechanics are straightforward:
- Set a monthly withdrawal amount based on your budget needs and portfolio size
- Withdraw that exact amount every month, regardless of what markets do or what inflation is
- Never adjust — the amount stays fixed in nominal terms
Because the amount never increases, two forces work in the retiree's favor for portfolio survival: inflation effectively shrinks the real withdrawal burden over time, and the portfolio keeps more capital invested during inflationary periods. This makes fixed withdrawal one of the safest strategies in terms of avoiding portfolio depletion.
However, the trade-off is severe: inflation silently destroys your standard of living.
| Years into Retirement | Inflation (3%) | Purchasing Power of $3,500 |
|---|---|---|
| 0 | — | $3,500 |
| 10 | 34% cumulative | $2,604 |
| 20 | 81% cumulative | $1,938 |
| 30 | 143% cumulative | $1,441 |
After 30 years, your $3,500 buys less than half what it did at retirement.
Why It Matters for Retirement Planning
Fixed withdrawal occupies one extreme of the spending strategy spectrum — maximum simplicity, maximum predictability, but zero adaptation. It suits specific situations:
- Short retirements (10–15 years) where inflation erosion is manageable
- Supplemental income when pensions, Social Security, or annuities cover core expenses and portfolio withdrawals fund discretionary spending
- Simplicity-first retirees who prioritize knowing exactly what they'll receive each month
For longer retirements, most planners recommend at least inflation-adjusted spending or a dynamic spending approach that responds to both inflation and portfolio performance.
A Practical Example
A 65-year-old retiree has $800,000 and needs $3,000 per month ($36,000/year — a 4.5% initial withdrawal rate).
- Year 1: $3,000/month covers groceries, utilities, and leisure comfortably
- Year 15: $3,000/month still arrives, but groceries now cost 55% more — the retiree quietly cuts back on dining out and travel
- Year 25: $3,000/month buys barely half of what it did at retirement. The retiree relies heavily on their pension for essentials
The portfolio likely survives (the shrinking real withdrawal helps), but the retiree's lifestyle has meaningfully declined. An inflation-adjusted or floor-and-ceiling approach would have traded some early spending certainty for better long-term purchasing power.
Frequently Asked Questions
- What is a fixed withdrawal strategy in retirement?
- A fixed withdrawal strategy means taking the same nominal dollar (or franc) amount from your portfolio every month, regardless of inflation or market performance. For example, withdrawing exactly $3,500 per month for the entire retirement period.
- How does fixed withdrawal differ from the 4% rule?
- The 4% rule adjusts withdrawals annually for inflation, maintaining purchasing power. A fixed withdrawal keeps the nominal amount constant — you get the same dollar amount each month, but that money buys less over time as prices rise. After 20 years of 3% inflation, your purchasing power drops by roughly 45%.
- When does a fixed withdrawal strategy make sense?
- It works best for retirees with short time horizons (under 15 years), those with other inflation-protected income sources like Social Security or pensions covering essential expenses, or those who value simplicity and predictability above all else.