Every retired investor I’ve ever talked to has experienced moments of doubt about the future. Will I last longer than my money? Will I be OK even if inflation heats up and the market cools down?

I can’t always give people the answers they would like to hear. But I can tell them how to structure a retirement plan so the portfolio never runs out of money. Is there a catch? Of course. But bear with me, and I’ll outline a plan that can be a winning combination for many investors.

I often advise people to treat themselves like millionaires. In this article, I’ll show you how you can treat your assets like a university endowment.

A university cannot afford to ever have its endowment conk out. The endowment is the institution’s financial backbone. It’s money that simply cannot be lost.

The university establishes what’s known as a “yield” – an annual percentage withdrawal that’s taken out to pay for operations, scholarships and various needs. A typical yield might be 6.5 percent. (This is not the investment yield on the university’s portfolio. It’s the income the university chooses to take out of the fund each year.) That means a $100 million endowment would generate $6.5 million annually. If the endowment doubles in value over a period of time, the annual withdrawal doubles along with it.

In an article titled "Make Your Retirement Dreams Come True", we showed how you could use a globally diversified portfolio to provide income that would rise modestly every year, presumably enough to keep you ahead of inflation. We show the effects, starting with a $1 million portfolio, of withdrawing an initial 6 percent or an initial 8 percent, and increasing the withdrawal every year by 3.5 percent.

In a couple of tables based on actual returns, we show that some portfolios with heavy concentrations in bond funds simply could not keep up with a relentless string of ever-increasing withdrawals. And we show other combinations that would have thrived. The heart of the problem (where it existed) was the need to take out more money every year, come hell or high water.

Now I want to show you how to avoid that problem by treating your portfolio like an endowment fund. The priority in this plan is the long-term integrity of the fund itself. You honor that priority by taking out a fixed percentage of your portfolio each year, giving yourself a variable income that is likely to grow over time, though it won’t grow every year.

We all know that any investment portfolio will have some bum periods. In the plan we describe in the other article, we assume that you want immunity from that risk and that you require a steadily growing income regardless of the market. In other words, that plan puts all the risk on the fund and none on you.

This time, we show what happens when you share the risk with the fund. If the market has a bad year and the fund goes down in value by 10 percent, you take out less money in the following year, in effect helping the fund get back on its feet. After a great year, you get more income – and the fund grows, too.

You will find the heart of our case in Tables 1 and 2.

Table 1 is based on a global equity portfolio split 50/50 between U.S. and international equity funds. The table compares the presumed effects from 1970 through 200 of taking out either 6 percent each year or 8 percent each year.

To make this table, we assumed an investor started with $1 million at the end of 1969, took out $60,000 (or $80,000) for living expenses in the following year, and left the remainder invested through the year.

We assumed the same pattern continued each year, with each annual withdrawal calculated as a percentage of the previous year-end balance. You’ll see that the second year’s withdrawal was lower, reflecting a loss in the portfolio. But the fund had two great years in 1971 and 1972, and that meant much larger withdrawals in 1972 and 1973 yet the fund itself continued to grow.

I suspect your first reaction to this table may be to quickly choose either the 6 percent or the 8 percent withdrawal rate. Which one you instinctively choose may tell you something about your priorities. If your priority is maximum income, you may be “naturally” drawn to the 8 percent rate. If your priority is maximum accumulation in your portfolio, you will gravitate to the 6 percent withdrawals.

But the reality, as this table shows, is not quite what it seems. If you stick with this program long enough, you’ll find that more becomes less, and less becomes more. We’ve identified some things to look at in the bullet points to the left of the table.

Those points cover the main things an all-equity investor would want to look at in choosing between a higher withdrawal rate and a lower one. (And of course there’s nothing that says the rate has to be either 6 percent or 8 percent. It could be 7 percent or anywhere else in between that is comfortable.)

I think it’s obvious that you shouldn’t embark on this plan unless you have some flexibility in your year-to-year needs. The beauty of this approach is that it lets the market impose some discipline on a retiree. If the portfolio suffers a disappointing year, you take out less money the next year. If there’s a great year, you take out more the following year. And no matter how bad things get, the portfolio can never fall all the way to zero, because you always leave more than 90 percent of it invested at the start of each year.

In Table 2, we’ve made exactly the same comparisons between the two withdrawal rates. The only difference is the portfolio, our most popular with retirees, is globally balanced between equity funds and bond funds. In this case, the returns are lower, and so is the volatility. But many of the same tradeoffs are at work here, too.

Many retirees face an uncomfortable tradeoff between spending money on themselves and preserving their wealth to leave to their children. These two tables show one obvious effect of that tradeoff quite well. If you take out more, you leave less for the kids. But they also show that if you live long enough, taking out less every year ultimately means more for you and more for your heirs.

In each portfolio, the 6 percent withdrawal rate produced lower income (as compared with the 8 percent rate) in the first 14 years. But starting in the 15th year, retirees withdrew more money under the 6 percent plan than in the 8 percent one.

This points to some other factors that retirees must weigh. How long do they reasonably expect to live? If you start withdrawing money when you’re 55, you’ll be able to take out much more over your expected lifetime by withdrawing 6 percent than by withdrawing 8 percent. But if you start much later in life, your withdrawals at 6 percent might never “catch up” with what you’d have if you took out 8 percent a year.

It’s also generally true that investors need more income in their early retirement years than in their later years. That might argue in favor of the 8 percent withdrawal rate. There is nothing fixed, of course, about our choices of 6 percent or 8 percent. You could split the difference and take out 7 percent every year.

If you can adopt a lifestyle that gives you some flexibility in the amount you must withdraw each year from your investments, treating your portfolio like an endowment could be the best thing for you – and for your heirs.