The Best Retirement Strategies for Leaving Money Behind

In our recent annual study on safe withdrawal rates, my colleagues Tao Guo, Jason Kephart, Christine Benz, and I looked into a variety of strategies that retirees can use to manage portfolio withdrawals. We examined a total of nine different strategies, many of which allow for higher withdrawal rates than the well-known “4% rule” originally developed by Bill Bengen.

Ultimately, the best method to use depends on what’s most important to you. All of the approaches we looked at involve some type of trade-off—simple versus complex, higher starting withdrawal rate versus more volatility in cash flows, and maximizing lifetime spending versus leaving money behind for heirs. Over the next few weeks, I’ll discuss which methods are the best fit based on several different metrics that retirees might prioritize.

The Best Strategies for Maximizing Money Left Behind

For some retirees, leaving a monetary legacy for children, grandchildren, or charitable organizations is a priority. Although lifetime giving has become increasingly popular, an inheritance can be a tangible way of expressing care and concern for the family, making sure loved ones have the financial resources to meet their goals, or setting up a solid foundation for generational wealth.

To measure the amount of money left behind, we used forward-looking return and volatility assumptions to test 1,000 hypothetical return patterns for a $1 million starting balance over a 30-year period. We then calculated the median portfolio balance remaining at the end of the 30 years, assuming a portfolio made up of 40% stocks and 60% bonds and a withdrawal rate that ended with a positive balance in at least 900 of the trials.

Three of the strategies we looked at were standouts based on the size of the median portfolio balance at the end of the 30-year period, as shown in the graph below.

Base Case: $1.42 million median portfolio balance after 30 years

The “base case” assumes the retiree uses a given percentage (in this year’s study, 3.9%) of the portfolio value to calculate the first-year withdrawal amount and then adjusts that amount each year for inflation. The dollar value of withdrawals remains flat each year in inflation-adjusted terms. A retiree following this method would still spend the same amount even if the portfolio enjoyed a series of above-average returns. Because this method is inherently conservative, it generated the highest ending portfolio value of any strategy we tested.

Annual Spending Declines: $1.34 million median portfolio balance after 30 years

We also tested a strategy that incorporates the average decline in spending that occurs over the retirement lifecycle. Research from the Employee Benefit Research Institute has found that inflation-adjusted household spending has historically fallen by 19% from age 65 to 75, 34% from age 65 to 85, and 52% from age 65 to 95. For our research, we streamlined these assumptions to reflect a steady decline in inflation-adjusted household spending of 2% per year throughout retirement. This number is also in line with 2021 research from T. Rowe Price.

The decline in spending over time built into this method leads to an ending portfolio value slightly below that of the base case.

Forgo Inflation Adjustment Following Annual Portfolio Loss: $1.28 million median portfolio balance after 30 years

This method begins with the base case of fixed real withdrawals throughout a 30-year time horizon. However, to preserve assets following down markets, the retiree skips the inflation adjustment for the year following a year in which the portfolio has declined in value. This might seem like a modest step, but the cuts in real spending, while small, are cumulative. That is, the effects of such cuts ripple into the future, as these changes permanently reduce the retiree’s spending pattern. With lower spending, this method ended up with the third-highest ending portfolio value of the strategies we tested.

Other Benefits of These Three Methods

All three of these methods also had a couple of other advantages. Because of the large amount of assets left over at the end of the 30-year period, all three methods ended up with relatively high total spending + ending values (the sum of median lifetime spending and the median portfolio value remaining after 30 years).

Spending patterns for all three methods are also relatively predictable. For the base-case method, it remains constant each year, making this method the best option for retirees seeking a steady “paycheck equivalent” that keeps up with inflation each year. For the declining spending method, portfolio withdrawals decline each year, but by a small and predictable amount. And the forgo inflation method makes only minor adjustments after any annual declines in portfolio value.

Another advantage is that all three methods are inherently conservative. The “leftover” assets could be set aside for bequests, but could also be used to cover spending shocks later in life, such as long-term care. A 2025 report written by Spencer Look and Jack VanDerhei of the Morningstar Center for Retirement & Policy Studies found that 43% of baby boomers will incur long-term-care costs, with the average cost of that care totaling more than $240,000. Because these potential costs are so high, having a large amount of assets remaining toward the end of life can provide peace of mind and provide an insurance policy of sorts that can be used to improve the quality of life if a retiree needs additional care.

Drawbacks of Spending Methods That Maximize Money Left Behind

But there are some trade-offs. Maximizing the amount of assets leftover at the end of life means there’s less room for spending while the retiree is still alive. All three methods had lifetime spending amounts on the lower end of all the strategies we tested. For the base-case and forgo inflation methods, starting withdrawal rates were relatively low, at 3.9% and 4.3%, respectively. (Because it builds in lower spending over time, the declining spending method allowed for a more generous 5.0% withdrawal rate at the beginning of retirement).

Retirees following the forgo inflation and declining spending methods could end up with a relatively austere spending budget later in life, especially with the declining spending method. Although it’s based on spending patterns for the average retiree household, spending less and less over time won’t be appealing for everyone, especially for retirees who enjoy good health and want to continue spending on travel and other active pursuits.

Another drawback is that all three of these methods are relatively inflexible. The base-case and declining spending methods follow a preset template, while the forgo inflation method only makes minor adjustments following a portfolio decline. Several of the other strategies we tested involve more variation in spending from year to year, but also do a better job of fine-tuning spending based on changes in the portfolio value over time.

Finally, retirees might also want to consider the pros and cons of prioritizing bequests to begin with. Many people receive a lump-sum inheritance when they’re already approaching retirement themselves, but gifting smaller amounts when a family member is younger can create more impact and immediate utility, especially if the gifts help cover costs such as a first home or education for grandchildren.