Retirees should move beyond the long-held “4% Rule” and take into account the full range of financial opportunities and risks they could face going into the golden years.

Making some better choices about their retirement savings while still on the job is a critical part of that planning; with news that some 401(k) account balances are at an all-time high, benefits managers can use this as a golden opportunity to talk with employees about making the right savings choices, long before retirement.

In the end, there is no single rule that will work for everyone, according to recent American Institute for Economic Research analysis. However, the report does say the early retirement years will matter most in having successful long-term retirement finances, and that a flexible drawdown strategy will lead to better retirement outcomes.

“Recent record markets have resulted in increased retirement savings for millions of Americans,” says Jim MacDonald, president of workplace investing with Fidelity Investments. “Now is a perfect time for people to seek guidance to ensure their savings and investment strategies can weather all market conditions.

The report points to the first five to 10 years of retirement having the most “outsized impact” on long-term success. Spending less during these years will provide a better likelihood of positive outcomes over the retirement horizon.

The analysis groups several retirement drawdown strategies into three broader categories with a few additional spin-offs:

  • Constant dollar (withdrawing a fixed amount of the portfolio annually).
  • Constant percentage (withdrawing a fixed percentage of the portfolio annually).
  • Increasing percentage (adjusting the drawdown percentage upward throughout retirement).

There will be four major retirement finance risks that will determine what drawdown strategy or strategies to use, AIER says: lifespan uncertainties, fluctuating market returns, potential inflation and unforeseen personal expenditures.
Flexibility in choosing a drawdown strategy will lead to better retirement outcomes, AIER says. “The best simulated results come from strategies that increase the drawdown percentage later in retirement.”

Retirement finance is “as much art as science, an art that can be practiced by retirees themselves,” the group says. A retirement strategy informed by quantitative analysis and adaptive to market and life conditions will most likely to provide financial security, the study notes.

Dovetailing with the AIER study, Fidelity also released its own analysis of its second quarter 401(k) and IRA retirement accounts, noting an increase in average balances.

For example, employees active in workplace 401(k) plans for a full 10 years noted a 15% spike per year over the past decade. Additionally, the average balance in a Fidelity IRA by the end of the quarter was also up 14.7%.

“The stock market has really had a positive impact on the average 401(k) balance,” Mike Shamrell, a spokesman for Fidelity, says.

He adds that averages balance rose to $91,000, a new all-time high for Fidelity 401(k) participants and an almost 13% increase from the this time last year, noting this is a first for the average balance to cross the $90,000 mark.

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