RETIREMENT
from the risky portion,” meaning the equity index fund. And those withdrawals are reset annually, or“ amortized like a fixed-term annuity.”
Variable Withdrawals For the withdrawal rate, Sharkansky says it’ s better not to have preset, consistent parameters— whether it’ s a maximum or minimum amount— but to allow clients variability in their income.“ The realistic approach to income variability is not to attempt to eliminate it but to manage it( financially) and adapt to it( behaviorally),” he writes in the report.
Still, there is a“ floor,” he goes on, which is whatever the TIPS ladder generates. It should be enough to satisfy essential,“ high-priority” spending with zero risk. Discretionary spending, however, principally comes from the equity portion of the portfolio. The“ lever” that gives retirees control over their discretionary income is the relative allocation between stocks and TIPS. The higher the TIPS portion, the less variable the income.
“ Instead of setting a high income target where reductions will be painful,” he writes, the saver should“ designate the discretionary income as a bonus.” If a retiree needs to spend even more than expected, they can always sell off shares“ at the obvious cost of reducing the capacity for future withdrawals.” It’ s up to the client to decide whether that’ s worth doing.
On the other hand, if clients find that the current withdrawal rate provides more income than they need, they can always“ retain the surplus” in their equity portfolio or“ use it to extend or enlarge the TIPS ladder,” he writes. In other words, they can reinvest it.
Sharkansky acknowledges that the idea of variable withdrawals may sound frustratingly unspecific. But he also says that’ s not a bad thing.
The strategy“ need not be used as a rigid predetermined formula. It is a framework that enables the retiree to make the most of their spending capacity within describable and acceptable trade-offs that adapt to market realities and the retiree’ s changing needs and expectations,” he writes.
Some clients may be uncomfortable about resetting their retirement income every year, Sharkansky acknowledges in the paper, and such people might prefer the 4 % rule and its appealing consistency.
Rolling TIPS
One obstacle to this approach is that TIPS have a due date: 30 years is their maximum maturity, which could interfere with the retiree’ s longevity plan. For a plan that lasts longer, the report suggests that a retiree consider rolling some TIPS over into new ones, particularly in years in which the equity portion provides unneeded, excess yield.
TIPS can be bought straight from the federal government via TreasuryDirect. gov, which is the least expensive way to get them, or on the secondary market from a broker. Some advisors recommend mutual funds or ETFs that hold a variety of TIPS with a range of maturities, but these can be more volatile and more expensive because of their annual management fees. Some clients may furthermore be uncomfortable about resetting their retirement income every year, Sharkansky acknowledges in the paper, and such people might prefer the 4 % rule and its appealing consistency. But he adds that“ fixed-rate strategies, even with guardrails, can potentially deplete a portfolio, with the retiree outliving their assets. More likely, though, the strategy turns out to be overly conservative, leading the retiree to live below their means.”
His strategy, by contrast,“ essentially guarantees that the portfolio will not be depleted during the retiree’ s lifetime [ because ] it calculates safe, flexible withdraw- als each year based on market values and expected longevity.”
The report does not completely address how to divide a portfolio between the equity index fund and the TIPS ladder. It says simply that it’ s up to advisors and retirees to calculate how to best balance income stability, spending flexibility and legacy goals through a customized allocation.
“ That decision depends on the retiree’ s situation,” the report says. They will have to consider a number of factors, he says, including the least amount they will need for their essential income and their target for discretionary income. They’ ll also have to take into account their initial portfolio value and income sources outside their portfolio. They’ ll want to consider how long they are likely to live and what kind of legacy they would like to leave. And they’ ll have to make tradeoffs, balancing their wish for higher withdrawals against the risk“ some withdrawals will be lower than desirable.”
To help advisors and clients better understand and implement the framework, Sharkansky launched The Best Third( TheBestThird. com), a companion website where investors and financial advisors can explore and test out the report’ s ideas. Users can adjust inputs like retirement age, portfolio value, income needs and confidence levels to generate customized, taxaware income plans.
50 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2025 WWW. FA-MAG. COM