The 4% Rule vs Annuity Income: Which Wins in a Down Market?

The traditional 4% withdrawal rule assumes a 60/40 portfolio. But what happens when markets drop? Scenario: $1M portfolio, $40K annual withdrawals Year 4% Rule (Bear Market) FIA with GLWB 1 $960K (-4%) $1M (0% floor) 2 $884K (-8% cumulative) $1M (0% floor) 3 $818K (-18% cumulative) $1M+ (possible gain) Income Y3 $40K (eroding base) $40K (guaranteed) The sequence of returns risk: If you withdraw 4% during a downturn, your portfolio shrinks faster. It's not just the market loss — it's the withdrawals on a declining base. The annuity advantage: Guaranteed income regardless of market conditions. No sequence risk. The trade-off is capped upside. The balanced approach: Many advisors now recommend an "income floor" from annuities covering essential expenses, with a portfolio handling discretionary spending. Where do you draw the line between guaranteed and market-exposed income?