When boomers finally reach their golden years they face a tough challenge: not outliving their retirement savings.

To help retirees create a spending plan, Bill Bengen, owner of Bengen Financial Services in San Diego created the 4% rule, which states if retirees use 4.5% of their savings every year, their nest egg should last 30 years.

Sounds simple enough. But here’s the problem: this rule was created when portfolios were earning 8%, in today’s market, portfolios earn half that-- around 3.5% to 4%.

"I think the 4% rule is an oversimplification, as most general rules are, but I understand the logic behind it, and it is fairly logical," said Tim Courtney, chief investment officer of Exencial Wealth Advisors in Oklahoma City where he oversees more than $1 billion in total assets.

I had a chance to speak with Courtney and ask him the following questions to help boomers better understand the 4% rule and how it can fit into boomers’ retirement planning. Here is what he had to say:

Boomer: What is the 4% rule?

Courtney: The 4% rule tells a retiree who leaves the workforce around 60 or 65 how much they can withdraw annually from their liquid savings every year for the rest of their lives and includes increases to an account for the rate for inflation.

Let's say you have a total liquid net worth of $1 million between your 401(k), IRA and brokerage account. The 4% rule would suggest you can withdraw $40,000 in year one, $41,200 in year two, and so on, assuming annual inflation of 3%.

Boomer: What are the pros and cons of the 4%rule?

Courtney: It is a good rule to use as an estimate of how much you should aim to save. Using our prior example, let's say you need $40,000 per year in retirement after you've factored in Social Security payments and any pensions. You can divide that sum by 4% to find out roughly how much you need to save, so it is serves as a good gauge in targeting your retirement savings goal.

But like everything designed for a "one size fits all" application, it never fits quite right. If someone has plans to retire much earlier or later than their early to mid 60s, then it will probably not provide a good estimate. Someone who retires at 50 may be withdrawing too much at the 4%  rate, but a 75 year old can probably afford a higher withdrawal rate.

The rule also assumes the retiree has a well diversified portfolio. If they have their money invested conservatively, in bank accounts or 100% bonds, then it will not work and they need to ratchet down their assumptions. Some retirees’ will have variability of withdrawals that will cause them to fail to keep pace with or outpace inflation, which will throw off the assumptions as well.

Boomer: What is meant by a "safe" withdrawal rate?

Courtney: This means how much a retiree can withdraw without severely increasing the risk of depleting their assets over time. For instance, if your portfolio is invested with a target potential return of 6% annualized over time, and you assume inflation will be about 3%, then a safe withdrawal rate is 3%.

Boomer: When taking a 4% withdrawal from savings are dividends included in the 4%?

Courtney: Yes, because that 4% withdrawal rate is based on the portfolio's total return expectations. If the portfolio earns 7% per year over time, and 3% accounts for inflation, then 4% can be withdrawn. That 7% total return includes dividends, interest payments, capital gains growth and everything else.

Boomer: For baby boomers that are entering retirement and are skeptical of the 4% rule, what are some of the new approaches for retirement planning withdrawals?

Courtney: First, the old rule that when we reach retirement age we need to be conservative and invest mostly in bonds no longer works given today's longer life expectancies. It’s important to invest "through" retirement, not "to" retirement.

The 4% rule is based on historical returns, and it assumes retirees will get more conservative as they age. I think 4% is logical, and it helps think about your withdrawal rate in terms of what you need from your portfolio.

It is hard to consider it a good fit given the wide range of portfolios. Some retirees invest only in U.S. stocks, or gold or emerging markets companies, and it will not work the same for all of these. If a retiree plans to have a non-security portfolio like gold bullion or farmland, then they needs to have a strategy that produces income from those investments over time.

In reality, some flexibility needs to be built into a withdrawal strategy. Accept the fact that some people are going to buy a new car every five years, and their withdrawal rates will jump to 7 or 8% each time. That is fine, but it needs to be built into the plan.

The 4% rule is a good starting place, but a thorough plan requires a retiree to set out a withdrawal timeline, starting with day one of retirement and factoring in mortgage payments, car purchases, gifting to children or grandchildren, and everything else. Put it on a spreadsheet so you can anticipate uneven withdrawals and build a portfolio that accounts for them.