Managing Money During Retirement
Defined Withdrawals
 A strategy for steady, dependable, and long-term investment income.
The Defined Withdrawals Investment Income Strategy

Many people assume that managing investments for income is simply a matter of selling investments as needed from a diversified portfolio.  But there are hidden dangers in this strategy (or lack of strategy) that are not obvious.  It is tempting to assume that the ups and downs of the market will balance out over time, or that at least one asset class will always be in favor to sell.  But asset classes often rise and fall together, and when an investor is forced to sell investments at bargain prices during a down market, a few bad years can quickly devastate a portfolio to the point where it is no longer possible to recover---even after the market does.

The problem occurs when one is forced to sell investments for income at painfully low prices during a down market.  Strategies and software tools that acknowledge this risk tend to focus on identifying the withdrawal rate that can withstand either worst-case hypothetical or worst-case historical scenarios.  But while these tools acknowledge the problem, they fail to solve it, and retirees are often forced to live on less income, leave less to heirs, or live with less certainty than might otherwise be possible.

It is important to consider not only the Withdrawal Rate, but also the Withdrawal Strategy.  The Defined Withdrawals strategy uses an Income Ladder to minimize the risk of having to sell stocks during a down market An income ladder is created by purchasing a series of high-quality fixed-rate investments with staggered maturity dates such that the combination of interest and matured principal exactly provide the desired income for a predetermined number of years.  The income ladder is a dependable source of income that replaces salary and makes it possible to hold stocks for the long-term when necessary---similar to the situation that likely existed before retirement.  You can use the free online calculator at to develop an income ladder. 

If the market cooperates, then it is typically desirable to sell some stocks to rebalance the portfolio and Extend the Income Ladder.  But if the market crashes, an investor with a long-term income ladder is less likely to be forced into selling stocks at bargain prices to meet income needs.  The investor can take comfort in knowing that current income is secure while waiting for a more favorable stock selling opportunity.  We call this process Navigating.

Some people confuse Navigating with Market Timing.  But navigating is not about moving in and out of the market on a routine basis or attempting to predict which direction the market will move in the short-term.  It is simply a matter of periodically reviewing the portfolio, typically on an annual basis, and using some logical criteria to decide whether or not it is a favorable time to sell stocks.  

 Decision Criteria Sell Hold
 Have the plan benchmarks been met or exceeded? Yes No
 Are stocks at or above trend-line? Yes No
 Am I beyond the minimum planned holding period? Yes No
 Am I nearing the maximum planned holding period? Yes No
 Are interest rates at higher levels? Yes No

It is not likely that the answer would ever be Yes, for all of the above questions, and every situation needs to be evaluated separately.  But in general, the more Yes's, the more likely it is time to sell some stocks to extend the income ladder.

There are many fad strategies that give excellent advice for investing in the recent past.  But the Defined Withdrawals strategy has proven the test of time.  We are pleased to report that retirees who have adopted it during the past 15 years are some of the happiest people you will find!  Click here for a real-life account.  The Defined Withdrawals strategy was developed based on a broad look at historic risks and market cycles.  We studied the very worst periods in history to understand how a retiree could have survived (see the creators' 1998 article titled, Navigating an Investment Storm).  We have not changed the strategy from the time that it was developed during the early '90s.  Since then there have been stock market bubbles and stock market busts.  But good strategy anticipates and expects these ups and downs.  It is when we assume that the future will be just like the present that we get into trouble.

It may be interesting to know that in the early days of developing the Defined Withdrawals strategy, we never intended to sell a software product.  We built the software for ourselves and to help clients.  In time we came to realize the power of the methodology and decided to make it commercially available.  With over 70 million baby boomers in the US on the brink of retirement, during a time of disappearing pensions and increasing longevity, we believe the Defined Withdrawals strategy fills a critically important gap in modern-day retirement planning.

By offering individual investors greater peace-of-mind during difficult times, we also believe that the strategy will help to stabilize financial markets.  The challenge for the income investors is to maintain steady and dependable income while investing in financial markets that are anything but steady and dependable.  The Defined Withdrawals strategy resolves this paradox, and it will reduce the tendency for baby boomers to engage in panic selling when they sense a declining market.

The Defined Withdrawals strategy is not complicated.  The portfolio is simply divided into two portions.  The objective of the first portion is to provide dependable income for a known number of years.  The objective of the second portion is to provide the growth that will be required to support income during later years.  It is the income certainty of the first portion that allows an investor to manage the second portion with a cool head. 

Download our free book, No Hype Investing for Income with the Investment Strategy Generator, for a more complete explanation of the Defined Withdrawals strategy.


Creating an income ladder using ordinary bank certificates of deposit is not difficult.  In fact the free online calculator at makes it easy.  CLICK HERE  

Free Book Download
This book explains how to use the ISG software, but it is much more than a software manual.  It is a comprehensive guide to managing investment and retirement income.  Learn about different investment income strategies, dollar-price erosion, income ladders, the new role that diversification plays when investing for income, the important difference between investing in bonds vs. bond funds, trend-line analysis, etc. CLICK HERE

Free Investment Income Simulator
In real life there are no do-overs, but with the Investment Income Simulator you can practice managing investments for income.  If you run out of money, click the repeat button and try a new strategy! CLICK HERE

A Nightmare On Wall Street
We recommend viewing this free presentation before using the Investment Income Simulator. CLICK HERE


Retirement Income Software
The unique ISG software is designed specifically for developing sophisticated retirement income plans using the Defined Withdrawals strategy. CLICK HERE 


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