Guardrails drawdown: how the rule works in good and bad markets

Guardrails is a drawdown rule that keeps your pay steady while markets track your plan, and changes it in planned steps when they do not. Ours starts at the same safe pay as our headline figure: for a couple with $450,000 at 65, $1,091 a week including NZ Super, or $236 a week from savings (about 2.74% of savings a year). Each year we compare your savings with the balance the plan expected by then. If they are below 80% of plan, pay is cut 10%; if they are above 120%, it is raised 10%. In our 1,000 simulated markets the money lasted to 95 in 99% of them, against 90% for the same amount each week, and the typical market saw one cut and one raise in 30 years. Rules checked 12 November 2026.

The rule we use

Our drawdown strategies calculator uses a plan-relative guardrail. It is our own rule, set out on the methodology page. The steps:

1. Start at the safe pay. That is the same amount each week that lasts to your planning age (95 by default) in 9 of 10 markets. For $450,000 it is $12,340 a year from savings, or $236 a week.
2. Work out the plan. With steady returns of 2.5% a year after fees and tax and 2% inflation, that pay leaves a known balance at each age. That is your planned balance.
3. Once a year, compare. Divide your actual savings by the planned balance for that age.
4. Below 80% of plan: cut your pay by 10%.
5. Above 120% of plan: raise your pay by 10%.
6. Otherwise: keep the same pay in today's dollars, which means lifting it by inflation.
7. After any change, reset the plan: work out a new planned path from today's balance at the new pay.

Three limits keep it sensible: at most one change a year; never below NZ Super alone; and no changes once the planned balance is under 2 years of planned draws, because near the end of a plan small sums would make the test twitchy.

Why not the classic rule?

The well-known Guyton and Klinger rules compare your withdrawal rate today with the rate you started at. That suits money meant to last for ever. But a plan that spends down to 95 raises its withdrawal rate year by year by design, as the balance shrinks, so the classic test cuts pay even when markets do exactly what was expected. Comparing with the plan avoids that: with steady returns, our rule never changes your pay.

Worked example: a bad start

Mere and Hemi retire at 65 with $450,000 and NZ Super of $854.08 a week. Their savings fall 12% in the first year and 8% in the second, then return 2.5% a year. Returns are before inflation; balances and pay are in today's dollars.

One cut, at 67, of $24 a week, about 2% of their total income. With returns steady after that, there are no more changes, and they still have $42,999 at 95. Had they kept taking $236 a week regardless, they would have had $5,970 left at 95.

A much worse start: five years of falls

Now suppose their savings fall 15% a year for five years in a row, then return 2.5%. That is a very harsh test. The rule cuts three times, at 67, 69 and 73, taking the savings part from $236 to $213, $192 and then $172 a week. Total pay goes from $1,091 to $1,067, $1,046 and $1,026. Even so, savings run out at 87, after which they live on NZ Super of $854.08. Taking the same $236 a week throughout, savings would have run out at 81. Guardrails cannot make a disaster painless, but it buys years.

Worked example: a good start

Now the same couple get 14%, 12% and 10% in their first three years, then 2.5% a year.

Their savings pay rises from $236 to $260 a week at 67, and they stay a little ahead of the new plan for decades. A second raise comes at 94, to $286 a week from savings, and they still have $236,840 at 95. With the same amount each week they would have had $275,281 left, unspent. Guardrails shares good years with you while you are alive to enjoy them.

What happens over 30 years

With steady 2.5% returns every year, the rule never changes your pay: your savings always match the plan exactly. That is by design.

Across our 1,000 simulated markets (2.5% average return, a 6% yearly swing that is our assumption):

• The money lasted to 95 in 99% of markets, against 90% for the same amount each week.
• The typical market saw 1 cut and 1 raise over 30 years. Only 7% of markets saw no change at all.
• About two in three markets had at least one cut, and about two in three had at least one raise. Three or more cuts happened in 8% of markets.
• The first cut, when there was one, typically came at 79, and the first raise at 78.

For our couple, total weekly pay including NZ Super is $1,091 in the first year and $1,091 at 85 in a typical market. In a poor market (the worst 1 in 10) it is $1,065 at 85, and the lowest weekly pay in a poor market is $1,046.

Why start at the safe pay?

You can choose a different starting rate on the calculator, but starting higher costs a lot of safety:

The rule measures you against the plan for the pay you are on. If that plan was too generous to begin with, the guardrails cannot rescue it.

Guardrails compared with the other rules

For the same couple with $450,000, here is how guardrails sits against the other three strategies on our calculator (weekly, including NZ Super, today's dollars):

Guardrails pays the same as the same amount each week for most people most of the time. The difference is in the tails. The same amount each week runs out before 95 in the worst 1 in 10 markets, leaving NZ Super alone; guardrails trims pay a little in those markets so the money lasts, and shares the gains in the best ones.

Is guardrails right for you?

Guardrails suits people who:

• can live with an occasional 10% cut to the savings part of their pay, especially if NZ Super covers essentials;
• would like to share in good markets rather than leave the gains unspent;
• are willing to check their balance once a year and act on it.

It suits people less if fixed costs such as rent or a mortgage take most of their income, since a cut then lands on essentials. Our guides on renting in retirement and retiring with a mortgage cover those cases. Compare all four rules in our drawdown strategies guide.

Running it yourself

1. Start at the safe pay from our calculator. Work out your planned balance for each age: the balance that pay would leave with steady returns of 2.5% a year and 2% inflation. A spreadsheet does this in a few rows.
2. Once a year, on the same date, divide your savings by the planned balance for your age.
3. Under 80%: cut your regular withdrawal by 10%. Over 120%: raise it by 10%. In between: lift it by inflation.
4. After a change, start a new planned path from your current balance at the new pay.
5. Stop adjusting once the planned balance is under two years of withdrawals.

This is general information, not financial advice.

Questions

What is the guardrails withdrawal strategy?

A rule that keeps your pay steady while your savings track the plan, then cuts pay 10% if savings fall below 80% of the planned balance, or raises it 10% if they rise above 120%. Ours is a plan-relative version; the classic Guyton and Klinger rules compare withdrawal rates instead.

How often does guardrails cut my pay?

In our 1,000 simulated markets the typical one saw one cut and one raise over 30 years, and only 8% saw three or more cuts. With steady returns there are no changes at all.

Can guardrails run out of money?

Rarely. It lasted to 95 in 99% of our markets, against 90% for the same amount each week. In a very harsh run, such as five years of 15% falls, savings can still run out, but later than without the rule.

What starting rate should I use?

We start at the same safe pay as our headline, about 2.74% of savings for a 30-year plan. Starting at 3.6% raised first-year pay to $1,165 a week for our couple, but the money lasted to 95 in only 42% of markets.