Each year, hundreds of articles are published in scholarly journals about money and retirement. Mercifully, most are forgotten. But a few go on to set standards within the financial-planning industry and, as such, directly affect retirees’ lives.

William Bengen, a certified financial planner in El Cajon, California, published several such articles starting in the mid-1990s. His pioneering research about withdrawal rates — the amount of money that retirees can pull from their nest egg each year — helped establish budgets and spending patterns for many people in later life.

Now, Mr. Bengen has some new ideas about how best to tap retirement savings. And once again, his work could become one of the most important tools in the 50-plus crowd’s financial future.

Mr. Bengen’s early research gave rise to what’s known as the four percent rule. In short, retirees can withdraw about four percent annually from their nest egg with a high probability that their savings will last 30 years — a good planning figure for the length of most retirements. Go much beyond four percent, and the chances of a nest egg surviving that long begin to drop.

The number has become gospel within financial-planning circles and has made Mr. Bengen something of a celebrity. A standing-room-only crowd greeted him earlier this year during an appearance at an industry conference outside Dallas. Mr. Bengen, a Brooklyn, New York, native who spent his college days studying aeronautics, says he’s “astounded” by the attention and explains that his research started as, and remains, “a way simply to help my own clients”.

To that end, the 59-year-old Mr. Bengen has developed a new approach to choosing a withdrawal rate in retirement. It gives individuals a chance to “customise” the process — and allows them, in some cases, to begin retirement with withdrawal rates slightly higher than once thought feasible. All without cracking their nest eggs.

Mr. Bengen does this by means of what he calls a financial “layer cake”, one with as many as seven layers.

“I don’t think we’ll see this on Emeril’s show,” Mr. Bengen says, referring to television chef Emeril Lagasse. But “it’s an easy way to explain withdrawals ... (and) leave out the flavours you don’t like.”

Mr. Bengen’s original research focused on portfolio longevity, the length of time a nest egg can sustain withdrawals before it runs out of money. Looking at historical returns on stocks and bonds, Mr. Bengen found that portfolios with about 60 percent of their assets in large-company stocks and about 40 percent in intermediate-term US bonds could sustain withdrawal rates of about four percent for virtually every 30-year period going back to 1926. That span, of course, includes the “financial cataclysms”, as Mr. Bengen describes them, of the 1930s and early 1970s.

But the same historical data show that once withdrawal rates begin to exceed four percent, portfolios run the risk of drying up. (At a withdrawal rate of six percent, almost half the portfolios in Mr. Bengen’s tests failed to last 30 years.)

Accordingly, Mr. Bengen identified four percent — actually, 4.15 percent — as a prudent rate of withdrawal for most retirees, one that would generate a maximum number of dollars each year with a maximum amount of security. That figure represents the percentage of a nest egg’s value tapped in the first year of retirement; withdrawals in subsequent years can be adjusted for inflation. Thus, if you start retirement with $600,000 in savings and inflation is running at three percent, you would withdraw $24,900 (4.15 percent of $600,000) the first year, $25,647 in year two, $26,416 in year three, and so on. Even as four percent became a benchmark, Mr. Bengen continued to look, he says, at “factors that could affect withdrawals outside the original assumptions.”

What if a retiree, for instance, is willing to accept a 90 percent chance of success, rather than roughly 100 percent, that his portfolio would last 30 years? And what if another retiree, whose parents and grandparents all died at relatively young ages, thinks his portfolio needs to last only 20 years rather than 30? Could these variables and others allow for different — and perhaps higher — rates of withdrawal?

That brings us to the kitchen.

With his layer-cake approach, Mr. Bengen allows retirees to customise withdrawals to their circumstances and see the risks and rewards involved.

Seven layers, or variables, go into the recipe. The first and most important layer is what Mr. Bengen calls the “withdrawal scheme”, which includes much of his original research: a 30-year-time horizon, a 60/40 split in stocks and bonds, annual rebalancing of one’s portfolio, and annual adjustments to withdrawals for inflation. This gives a “base” withdrawal rate, again, of 4.15 percent.

Above — and, at times, below — this layer, are the six remaining variables: asset allocation, success rate, rebalancing interval, superinvestor, time horizon, and desire to leave a legacy. Each of these variables or layers, when piled atop or below the base layer, can result in a higher, or lower, rate of withdrawal than 4.15 percent. Start with the asset-allocation layer. If you’re willing to add small-company stocks to your 60/40 mix, Mr. Bengen’s historical review of markets indicates that you can increase your withdrawal rate to 4.42 percent without diminishing the chances that your nest egg will last 30 years. Next, take the success-rate layer. If you’re willing to accept, say, a 94 percent chance that your portfolio will last 30 years — and a six percent chance that you’ll go broke — you can boost your withdrawal rate to five percent. Next, move to rebalancing. If you rebalance your portfolio less frequently than once a year, according to Mr. Bengen’s research, you can increase your withdrawal rate to about 5.1 percent. The superinvestor layer allows you to bet that your portfolio returns will exceed historical averages, which, again, could increase your withdrawal rate. The time-horizon layer cuts both ways. If you think your retirement will be shorter than 30 years, you can pull more money from your nest egg each year. If you think your retirement will exceed 30 years, that means reducing the rate of withdrawal.

Finally, if you wish to leave assets to your heirs or charity after you die, the legacy layer calls for cutting your withdrawal rate.

The “cakes” in the accompanying chart illustrate how two investors — one willing to take some risk (and expecting a relatively short retirement), and one taking a more conservative approach — might use these layers to bake a withdrawal rate.

If these changes in withdrawal rates sound small, the math suggests otherwise.

To learn more about withdrawal rates and layer cakes, you can read Mr. Bengen’s research in the August 2006 issue of the Journal of Financial Planning at www.fpanet.org/journal/. (Click on “Past Issues & Articles”.) To dig deeper, you can read his new book, “Conserving Client Portfolios During Retirement” (FPA Press), which is written primarily for financial planners — but contains a wealth of clear (even humorous) information about retirement planning for the lay investor.