How to Draw a Steady Portfolio Paycheck in Retirement

You've spent decades building your nest egg. Now you need to tap your investment portfolio in a tax-efficient way that covers your expenses while minimizing the risk you'll run out of money. So how exactly do you do that?

William Selden, a retired management consultant in Fort Lauderdale, Fla., has done his homework on this head-scratcher. "I literally have a five-foot high stack of papers I've printed off and read," says Selden, 60. On top of studying all the academic literature, he has calculated a "safe" spending rate for his portfolio and built his own models to forecast how long his money can last.

There's just one problem: The academic research "doesn't match my personal experience," he says. Some studies, for example, assume a constant rate of spending in retirement, whereas "my spend rate is all over the place. It's lumpy," says Selden, who retired in 2009. This year, he says, his daughter is graduating college and may go on to graduate school--tacking on an extra $20,000 to $40,000 that he hadn't planned to spend.