But, with interest rates at their lowest point in years and the volatility in the stock market, it has become nearly impossible to predict whether most retirement accounts will earn enough to fund a 4 percent withdrawal rate.

"It's not like the days someone could say they were going to invest in an income-generating portfolio and were going to live off the interest and be OK," Klein said. "If you are taking out as little as 3 percent of an account, there aren't any investment vehicles returning those rates on a systematic basis. Money markets are zero and bonds are at a historical low."

If you think about 4 percent, that amount isn't a lot, especially if a person has only saved up $50,000 to $100,000 in retirement. And most people don't think about how much they have and how much they can take out. Many retirees take 6 to 10 percent of their assets out per year, which will leave many of them without income toward the later years of their life.

Matthew Kenigsberg, vice president of financial solutions for Fidelity Investments, said that the 4 percent rule is only one example of a sustainable withdrawal rate.

"The way we define it, a sustainable withdrawal rate is a spending rate defined by the beginning balance and will be adjusted by inflation every year," he said.

If an employee has $200,000 in their 401(k) plan, they can take $8,000 out of their account in the first year and $8,163 in the second year.

"It is not a function of the balance each year. It is a function of the balance at the beginning of retirement and the inflation rate after," Kenigsberg said. "The 4 percent rule has proven historically to be a reasonable rate for certain retirees but history does not guarantee performance in the future."

Steve Feinschreiber, Fidelity's senior vice president of financial solutions, said that Fidelity estimates people will retire at age 67 and will need to plan for 28 years of income in retirement. If an individual looks at historic periods, they have a 99 percent chance of success using the 4 percent rule of thumb.

"If you are going to retire earlier, then the time horizon will be longer and the rule of thumb should be adjusted," Feinschreiber said. "For example, if someone retires at age 60, instead of the 4 percent rule of thumb your starting point may be 3.5 percent with that same chance of success."

The formula works the other way as well. If a person delays retirement into their 70s, they can withdraw more than 4 percent a year in retirement.

Determining your sustainable withdrawal rate is the first step in developing a retirement plan, Kenigsberg said.

"The sustainable withdrawal rate assumes that the rate of spending varies only with inflation. You spend the same amount of money in real dollar terms every year," he added. "In reality, the spending people do in retirement rises late in retirement as medical costs rise or goes higher when people first retire because they go on more vacations. Spending may not be static even after adjusting for inflation. The numbers are based on history. They may not be a good predictor."

Individuals should look at how old they are and how long they expect to live in retirement. Beyond that, spending needs in retirement could vary quite a bit from the early part to the later part of retirement. There are quite a few reasons why individuals would make adjustments to their sustainable withdrawal rate, he added.

Once you decide what your sustainable withdrawal rate will be, how do you go about taking money out of your investments?

"The rather naïve way is to take 4 percent of everything, IRAs, 401(k)s. Not that that's a terrible thing to do, but in general it is not the best thing to do," Feinschreiber said.

Fidelity has developed a withdrawal hierarchy that puts workers in a more tax-efficient strategy. Instead of taking 4 percent of everything, withdraw money from taxable accounts first to give your tax-advantaged accounts time to keep growing. Once you use up your taxable accounts, go to tax-deferred accounts. Save your tax free accounts like Roth 401(k)s and Roth IRAs for later in life, he said.

"Right now, there are a couple of different thoughts that are going on in the marketplace, primarily driven by the low interest rate environment and somewhat driven by the market volatility and fear we lived through during the 2008/2009 time frame," CAPTRUST's Klein said. "I think for us, we are still as a firm pretty firm believers in having a diversified portfolio to draw down. That means it would be an appropriate mix of stocks and bonds."

It is important to create a pool of cash within an investment portfolio so that it is easier to draw down funds and investors aren't constantly having to sell investments off, which are subject to the volatility of the market, she said.

"If they truly are trying to get income out of that pool, we would look at – similar to what a DB plan would do – creating a pool of cash they can pay benefits out of and let the rest of their money work for them and hopefully replenish some of that cash position," Klein said.

She encourages people to sit down with a financial advisor about five years before they retire to look at what they have so they can decide how to go about transitioning accounts over to provide this income.

"I think it is very difficult for someone who has perhaps not taken a huge interest in the investment types of vehicles and strategies to maneuver through all of the decisions they have to make," Klein said.

Individuals need to "start the journey earlier than they might think," she added. This is especially important for individuals who only have one type of investment and will immediately need those dollars they have accumulated for living expenses in retirement.

It is important that people diversify their investments even in retirement. She recommends that individuals resist the urge to go all cash. Have assets in cash, but also have an appropriate mix of stocks and bonds that will continue generating income so they always have enough cash to live on and can protect a portion of what they have accumulated.