INCOME
Three ways to draw income in retirement
A rule of thumb, a bond ladder, and insurer-backed income — what each depends on.
By Charles Mungovan, Founder, licensed insurance producer · Published 2026-08-14 · Last reviewed 2026-08-14
The 4% rule is a rule of thumb
The 4% rule comes from research on historical U.S. market data suggesting an initial withdrawal near 4% of a portfolio, adjusted for inflation, was sustainable over a 30-year period for certain stock-and-bond mixes. It is a research-based starting point for discussion, not a prediction and not a plan.
Results depend on asset allocation, fees, taxes, time horizon, inflation, and the sequence of returns — particularly early in retirement. It should not be read to mean that most portfolios are automatically safe for 30 years. Portfolio withdrawal decisions belong with an appropriately licensed investment professional.
Bond and CD ladders
A ladder holds instruments maturing in successive years, so each maturity funds a year of spending. It produces relatively predictable cash flow, but it carries real risks: interest-rate risk if instruments are sold before maturity, reinvestment risk when each rung matures, credit risk on corporate or municipal bonds, and inflation risk over a long retirement. CDs may receive FDIC insurance within applicable limits; bonds are not FDIC-insured.
Insurance-based income
An income annuity can provide payments for a stated period or for life under the terms of the contract. Those payments depend on the issuing insurer’s claims-paying ability, and the contract limits access to the amount used to fund it. Optional riders can carry charges.
Guarantees apply only as described in the issued contract and depend on the claims-paying ability of the issuing insurer. Annuities are not bank deposits, are not FDIC or NCUA insured, and are not guaranteed by any federal government agency.
What to map first
- Essential monthly expenses — housing, food, healthcare, insurance.
- Income already reliable — Social Security, pension, existing annuity payments.
- The gap between the two, which is where the rest of the plan does its work.
Educational information only. This page is not individualized insurance, investment, tax, legal, or accounting advice, and it is not a recommendation to buy or replace any product.