Based on this article at Financial-Planning.com, Morningstar’s head of retirement research, David Blanchett, starts with the 4% rule, and offers the following suggestions.
If half of one’s income is guaranteed (Social Security or pension), and half of expenditures are discretionary, Blanchett sticks with the 4% rule when with using a 50% stock and 50% bond portfolio. However, this means one must cut those discretionary expenses when times are bad. If 25% of income is guaranteed and 25% of expenditures are non-discretionary, the safe spend rate drops to 3.5%. If only 5% of income is guaranteed, safe spend rates decline to a dismal 2% to 2.4%, depending on how much spending is discretionary.
Furthermore, Blanchett notes historic returns supported that rule, but stock valuations are currently high and, along with many others, he forecasts lower returns for stocks, especially over the next 10 years. Those nearing retirement are most at risk.
Blanchett recommends annuities for guaranteed income, he states the best place for guaranteed income today is Social Security because delaying Social Security is buying the best deferred annuity on the planet.