Just like with inflows, outflows provide opportunities to rebalance and manage the portfolio. However, if you're taking distributions, you are likely retired, and the bigger concern is how to create adequate and sustainable income for the rest of your life. Here's our plan:

• Retirement income planning is unique for each person. Rules of thumb may work in other areas of financial planning and investing, but not with retirement income. Financial goals, assets, income needs, ages, and life expectancies all play out differently for people. The retirement plan drives the investment decisions.
• Have a withdrawal plan. Withdrawals should not be random, they should be part of an overall plan. The plan should 1) provide for a smooth and predictable income stream, 2) insulate the cash flow from market volatility, 3) shield the portfolio from untimely cash needs, 4) opportunistically replenish cash and rebalance the portfolio, and 5) provide for tax flexibility.
• Withdrawal rates are not static. Withdrawal rates have to respond to market conditions and the health of the retirement plan. If the plan is going well, more withdrawals may be OK. However, withdrawals may need to be lowered if it is not. Age also plays a factor in appropriate withdrawal rates.
• Don't overlook the option of annuitization. Some people are dead-set against annuities or not aware of what's available. For the most part, that's fine. Variable and fixed annuities usually don't make a lot of sense. However, annuitization (turning a portion of your assets into a lifetime stream of income – like a pension) should at least be considered, especially for very risk-averse investors.
• Distributions allow for portfolio rebalancing. As cash is withdrawn, sales are needed to replenish the cash. Review portfolio's asset allocation. Investments that are over-weighted could be perfect for trimming back. Not only do you free up cash, but you also rebalance the portfolio.
• Consider taxes. Sales in taxable accounts may create taxable gains. Review accounts for offsetting losses. Distributions from tax-deferred accounts are taxed as ordinary income. Taxes need to be considered and accounted for on all withdraws.