The assumption under Bengen's rule is that withdrawals are adjusted for inflation throughout retirement, regardless of portfolio performance.
One of the rules proposed by financial planner Jonathan Guyton in his 2006 paper in the Journal of Financial Planning is to adjust withdrawals for inflation annually except in the years after a negative portfolio return.
His main point is that it doesn't make sense to increase withdrawal in line with inflation in years following poor portfolio performance. Retirees don’t want to play a game of chicken with their retirement portfolios and are often prepared to make compromises.
In this video, I use Timeline to illustrate the impact of this inflation adjustment rule proposed by Guyton on success rate and client's income, in real and nominal terms.