A lot of people don’t manage to save much money for retirement and end up heavily reliant on Social Security. And I feel for folks in that boat.

It’s not easy getting by on those benefits alone. So a far better bet is to try to bring a generous nest egg into retirement so you have more flexibility to enjoy that stage of life.

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But saving for retirement isn’t enough. It’s just as important to manage your savings wisely. And in that regard, there’s a big trap far too many retirees fall into.

Are you managing your savings strategically?

Many people assume that the 4% rule is the most effective retirement withdrawal strategy for them to use. The rule states that if you withdraw 4% of your savings your first year of retirement and adjust future withdrawals to account for inflation, your nest egg has a very good chance of lasting for 30 years.

But there are big problems with this approach you should know about if you’re thinking of using the 4% rule to manage the nest egg you’ve worked hard to build.

First, the rule makes assumptions about your investment mix. If it’s not fairly evenly split between stock and bonds, your calculations are going to be thrown off. A more conservative portfolio, for example, probably won’t generate enough income to support a 4% withdrawal rate.

The rule also makes assumptions about your retirement age. If you’re ending your career at age 59 1/2, which is when you become eligible to tap a 401(k) or IRA without risking an early withdrawal penalty, you might need your savings to last more than 30 years. That means a 4% withdrawal rate may be too aggressive.

On the flipside, some people intentionally try to retire later in life — either because they love working, want to save more money, or want the option to delay Social Security until age 70 for the highest possible monthly paycheck they can get.

If you’re retiring at 70 or beyond, though, then you may not need your savings to last 30 years. And in that case, sticking to a 4% withdrawal rate could mean denying yourself the option to spend more freely when that possibility very much exists.

A custom plan is a far better bet

The reason the 4% rule has become so popular is that it’s easy to adopt. Why run your own scenarios and do your own research when you could follow a well-established set of guidelines?

But there’s a very good chance the 4% rule won’t work for your retirement savings for one reason or another. So rather than set your mind on it, do your own calculations. Or, hire a financial advisor to help you come up with a suitable strategy based on your individual circumstances.

You may come to the conclusion that a 4% withdrawal rate is, indeed, optimal for your nest egg. But that’s a decision you should get to on your own rather than follow a broad rule of thumb.

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