Guyton-Klinger is a dynamic withdrawal strategy that adjusts your spending based on portfolio performance using guardrails. When your withdrawal rate drifts too high (portfolio falling), spending is cut. When it drifts too low (portfolio rising), spending is boosted. This flexibility allows a higher initial withdrawal rate (~5%) with comparable success rates to the static 4% rule.
The Guyton-Klinger rules are a dynamic retirement withdrawal strategy developed by Jonathan Guyton and William Klinger. Unlike the static 4% rule, which ignores portfolio performance entirely, Guyton-Klinger adjusts spending in response to market conditions using a system of guardrails — percentage thresholds that trigger automatic spending cuts or increases.
How It Works
The strategy starts with an initial withdrawal rate (typically 5–5.5%, higher than the traditional 4%) and applies three decision rules each year:
1. The Withdrawal Rule
Calculate the current withdrawal rate: annual withdrawal ÷ current portfolio value. Compare this to guardrail thresholds.
2. The Capital Preservation Rule (Upper Guardrail)
If the current withdrawal rate exceeds the upper guardrail, spending is too high relative to the portfolio — trigger a spending cut:
- Upper guardrail: initial withdrawal rate × (1 + guardrail %) — e.g., 5% × 1.20 = 6%
- Cut amount: reduce spending by the cut percentage (typically 10%)
- This protects the portfolio during downturns
3. The Prosperity Rule (Lower Guardrail)
If the current withdrawal rate falls below the lower guardrail, the portfolio has grown enough to support higher spending — trigger a spending boost:
- Lower guardrail: initial withdrawal rate × (1 − guardrail %) — e.g., 5% × 0.80 = 4%
- Boost amount: increase spending by the boost percentage (typically 10%)
- This lets you enjoy gains during bull markets
Example with a $1,000,000 portfolio and 5% initial rate:
| Scenario | Portfolio Value | Current Rate | Action |
|---|---|---|---|
| Start | $1,000,000 | 5.0% | Withdraw $50,000 |
| Year 2 (market crash) | $780,000 | 6.4% | Above 6% guardrail → cut 10% to $45,000 |
| Year 3 (recovery) | $850,000 | 5.3% | Within guardrails → no change |
| Year 5 (bull market) | $1,300,000 | 3.5% | Below 4% guardrail → boost 10% to $49,500 |
Why It Matters for Retirement Planning
Guyton-Klinger addresses the fundamental flaw of the 4% rule: it adapts to reality. The results are significant:
- Higher initial spending: a 5% initial rate with guardrails can match or exceed the success rate of a static 4% rate
- Portfolio protection: automatic cuts during downturns dramatically reduce sequence-of-returns risk
- Upside participation: boosts during bull markets improve quality of life
- Psychological framework: clear rules remove emotion from spending decisions
Interactive chart: guyton-klinger-guardrails
Withdrawal rate with guardrails vs. static 4% rule over a 30-year simulation
Coming soon
Guyton-Klinger in Retirement Lab
Retirement Lab implements the full Guyton-Klinger strategy as a pro-tier dynamic spending option. You can configure:
- Initial withdrawal rate — the starting percentage
- Guardrail width — how far the withdrawal rate must drift before triggering an adjustment
- Cut percentage — how much spending decreases when the upper guardrail is hit
- Boost percentage — how much spending increases when the lower guardrail is hit
The Monte Carlo simulation then models the full interplay: market returns affect the portfolio, the guardrails trigger spending adjustments, and those adjustments feed back into the portfolio trajectory across thousands of iterations.
Frequently Asked Questions
- What are the guardrail percentages in Guyton-Klinger?
- Typical guardrails are set at ±20% of the initial withdrawal rate. For a 5% initial rate, the upper guardrail is 6% and the lower guardrail is 4%. When the current withdrawal rate crosses these thresholds, spending is cut (usually by 10%) or boosted (usually by 10%). The exact percentages are configurable in Retirement Lab's pro tier.
- Is Guyton-Klinger better than the 4% rule?
- In Monte Carlo simulations, Guyton-Klinger consistently outperforms the static 4% rule — allowing a higher initial withdrawal rate (often 5-5.5%) with comparable or better success rates. The trade-off is income variability: your spending fluctuates with market performance rather than staying constant in real terms.
- How much can my income drop with Guyton-Klinger?
- In a severe downturn, multiple consecutive spending cuts of 10% can compound. With standard guardrails, a prolonged bear market could reduce spending by 20-30% from the initial level. However, this flexibility is precisely what protects the portfolio from depletion — and spending recovers when markets do.