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Bengen Floor-Ceiling

Withdraw 4% of your current portfolio each year, but never less than 80% or more than 120% of your original withdrawal (adjusted for inflation).

How It Works​

The Floor-Ceiling method takes the simplicity of a percentage-of-portfolio withdrawal and adds hard guardrails to prevent extreme outcomes. Each year, you calculate 4% of your current portfolio value. But instead of taking that amount directly, you clamp it between a floor and a ceiling based on your initial Year 1 withdrawal.

The floor (typically 80% of the Year 1 amount, adjusted for inflation) ensures that even after a severe market crash, your spending never drops below a livable minimum. The ceiling (typically 120% of the Year 1 amount, adjusted for inflation) prevents you from ratcheting up spending so much during a bull market that a subsequent downturn becomes catastrophic.

This gives you the adaptiveness of a percentage-of-portfolio approach — your spending broadly tracks the market — while bounding the range of possible outcomes. You get some of the upside in good markets and absorb some of the downside in bad markets, but never so much that your lifestyle becomes unrecognizable.

The Formula​

Year 1:

withdrawal = initialPortfolio × baseRate

Year 2+:

proposed = currentPortfolio × baseRate
floor = year1Withdrawal × floorPercent × cumulativeInflation
ceiling = year1Withdrawal × ceilingPercent × cumulativeInflation

if proposed < floor:
    withdrawal = floor
elif proposed > ceiling:
    withdrawal = ceiling
else:
    withdrawal = proposed

Key parameters:

  • Base rate: 4%
  • Floor percent: 80% of Year 1 withdrawal
  • Ceiling percent: 120% of Year 1 withdrawal

Pros & Cons​

Advantages:

  • Prevents extreme spending swings in either direction
  • Balances portfolio responsiveness with lifestyle stability
  • Simple guardrails that are easy to understand and implement
  • Inflation-adjusted bounds maintain real purchasing power

Limitations:

  • Spending cuts of up to 20% may still be uncomfortable
  • Less flexible than purely dynamic methods in either direction
  • Floor spending level may not be sustainable if the portfolio declines severely over many years
  • The 80/120 bounds are somewhat arbitrary and may not fit every situation

Example​

Starting portfolio: $1,000,000 | Base rate: 4% | Floor: 80% | Ceiling: 120%

Year 1 withdrawal: $40,000 (assuming 2.5% annual inflation for bounds)

YearPortfolioProposed (4%)FloorCeilingActual Withdrawal
1$1,000,000$40,000——$40,000
2$850,000$34,000$32,800$49,200$34,000
3$750,000$30,000$33,620$50,430$33,620 (floor)
5$1,350,000$54,000$35,315$52,973$52,973 (ceiling)

In Year 3, the 4% calculation would yield only $30,000, but the floor prevents spending from dropping below $33,620. In Year 5, the portfolio has grown enough that 4% would yield $54,000, but the ceiling caps it at $52,973. The bounds keep spending within a manageable range.

When to Use This Method​

The Floor-Ceiling method works best for retirees who:

  • Want spending that tracks the market but within defined limits
  • Need a guaranteed minimum income level (the floor)
  • Want protection against overspending in bull markets
  • Prefer simple, rule-based guardrails over complex multi-factor adjustments
  • Can tolerate spending fluctuations of roughly 20% in either direction
Try It Yourself

Compare Floor-Ceiling against other strategies using your own numbers in the Scenario Builder.

References​