A Modern Framework for Retirement Income

The ARVA Strategy In Practice

This is a summary for financial advisors of Stefan Sharkansky’s 2025 article “The Only Other Spending Rule Article You Will Ever Need“, published in the Financial Analysts Journal.

As financial advisors, we’re tasked with helping clients turn accumulated savings into sustainable retirement income. That means solving for longevity risk, inflation, market volatility, spending behavior, and legacy preferences. A paper recently published in the Financial Analysts Journal, “The Only Other Spending Rule Article You Will Ever Need” by Dr. Stefan Sharkansky, presents a research-backed framework that offers a practical, flexible, and more efficient alternative to traditional spending rules.

At the heart of the strategy is a refined implementation of the Annually Recalculated Virtual Annuity (ARVA), originally introduced by Waring and Siegel (2015). This version advances the concept with clear guidance on asset allocation, income volatility management, longevity risk, and time-varying consumption goals. The result is a flexible system that advisors can implement using just a TIPS ladder and a stock index fund.

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Core Components: TIPS + Stocks

The proposed retirement portfolio consists solely of:

A TIPS ladder, constructed to maturity, serving as the risk-free income floor, and

A broad U.S. stock index fund, amortized over the expected retirement horizon to provide variable but efficient withdrawals.

This setup intentionally avoids conventional bond funds, which introduce both market volatility and sequence risk without contributing to income stability. The author demonstrates that TIPS held to maturity are more effective than bond funds at reducing income volatility, while just as effective at reducing portfolio volatility and also providing predictable, inflation-protected real income.

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Key Innovation: ARVA Recalculated Spending

Unlike static withdrawal rules (e.g. the 4% Rule) or decision-based “guardrails” (e.g. Guyton-Klinger), the ARVA approach recalculates annual withdrawals from the stock bucket based on three inputs:

This effectively treats the equity portfolio like the payout phase of a fixed-term, variable  annuity—with no extra fees, no risk of premature depletion, and no middleman that limits payouts and death benefits.

The TIPS ladder, meanwhile, is designed to provide constant real-dollar income—e.g. covering essential or base spending needs—for up to 30 years, based on current TIPS availability and yields.

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Why ARVA Outperforms Static Spending Rules

Historical simulations (1,470 rolling 30-year periods using Robert Shiller’s U.S. return data from 1871 to 2023) show that:

• ARVA almost always produces higher average annual withdrawals than the 4% Rule or Guyton-Klinger (GK) guardrails.
• ARVA has no chance of premature portfolio depletion, because it amortizes the remaining equity balance each year to the end of the horizon.
• Even in poor market sequences, ARVA outperforms GK in lower withdrawal percentiles while maintaining more upside.
• Unlike GK, which often “banks” market gains into unintended legacies, ARVA prioritizes lifetime consumption while leaving the retiree flexibility to designate a legacy reserve if desired.

This makes ARVA particularly well-aligned with fiduciary principles: helping clients spend appropriately while safeguarding sustainability and offering transparent trade-offs.

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Managing Volatility: Framing and Asset Allocation

A common advisor concern with variable withdrawal strategies is client discomfort with income volatility. The ARVA paper directly addresses this in two ways:

1. Behavioral framing: Advisors can distinguish between “base” and “bonus” income. For example, cover essential expenses with Social Security and the TIPS ladder, and treat stock-based withdrawals as bonus income for discretionary spending. Framing the variable portion as a bonus helps clients accept year-to-year changes without emotional distress.
2. Portfolio allocation: The mix between TIPS and stocks controls the volatility profile. More TIPS = less income variability. Less TIPS = higher expected income with more fluctuation. The author provides formulas for determining the appropriate stock/TIPS allocation based on a client’s minimum acceptable withdrawal, confidence level, and tolerance for shortfall risk.

This approach offers advisors a way to customize the portfolio in line with each client’s risk capacity and income preferences—without reliance on opaque guardrail rules.

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Time-Varying Income Goals

The ARVA framework accommodates non-constant income targets, including:

• Early retirement “go-go” spending followed by “slow-go” and “no-go” phases
• Front-loading income before Social Security kicks in
• Shaping income to match increasing health care needs later in life

By adjusting the relative “weights” of planned annual withdrawals in the amortization formula, advisors can reflect any desired income shape, including Blanchett’s “retirement spending smile.” This is a major advantage over static strategies that presume level consumption throughout retirement.

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Longevity Risk: Customizing the Time Horizon

A fixed 30-year horizon is often used for modeling, but ARVA supports flexible handling of longevity risk through:

1. Actuarially long time horizon (set the time horizon to, say, the 90^th percentile of survival age).
2. Dynamic horizon updates (e.g., adjust to the 80th percentile survival age annually)
3. Declining income targets based on survival probabilities (as in Sharpe 2017 or Kaplan 2020)
4. Optional reserve strategies (e.g., holding back principal for late-life care or annuity purchase)

Advisors can choose the most suitable method based on the client’s health, risk aversion, and desire for income stability at older ages.

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Implications for Advisors and Practice Management

For advisors focused on evidence-based, fiduciary advice, this strategy presents a compelling opportunity:

• Transparency: Clients can see exactly how their spending plan is calculated and adjusted—no black-box rules.
• Flexibility: Advisors can adapt plans in response to market changes or client preferences without abandoning the strategy.
• Cost-efficiency: The approach can be implemented with low-cost ETFs and direct TIPS purchases—no expensive insurance products needed.
• Compliance-friendly: The methodology is grounded in historical data, avoids misleading success probabilities, and explicitly honors the budget constraint.

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Implementation: What You Need

To apply this framework for clients, you need:

• Access to real-time TIPS pricing and construction tools (many are available free online)
• A spreadsheet template that applies the amortization formula to equity assets based on market value, time horizon, and discount rate
• A structured conversation with clients about income floors, variability tolerance, and legacy preferences

From there, advisors can generate annual withdrawal recommendations, demonstrate outcomes under different scenarios, and update the plan annually with minimal overhead.

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Conclusion

The revised ARVA strategy offers a significant upgrade over static rules of thumb and ad hoc withdrawal systems. It’s simple, flexible, and supported by a rich empirical foundation. Most importantly, it puts client spending—not portfolio preservation—at the center of retirement planning.

Rather than managing to an arbitrary “probability of success,” ARVA helps clients optimize lifetime income, maintain dignity and control, and avoid both the fear of running out and the regret of underspending. For fiduciary advisors committed to delivering practical, research-informed outcomes, ARVA may be the most client-aligned decumulation framework available today.