Introduction to Withdrawal Planning During Retirement
KEY TAKEAWAYS:
To maximize your income from your retirement portfolio, you need to craft your personal retirement withdrawal plan, which should include much more than just rules and laws about taking money out.
Utilize a 4-step planning process to maximize the lifetime benefit of your portfolio.
There are strategies and techniques to optimize your situation regardless of whether you anticipate having just enough money in retirement, too little or even too much.
The best portfolio withdrawal plan is both a science and an art.
Searching online about how to retire and use your savings to live on in retirement turns up tons of information. There are articles about the percentage to take out, the taxes to be aware of, and the rules and regulations. The type of article that you probably won’t find is the one that puts these academic facts together with a person’s life considerations to try and offer a real plan of action for withdrawals. This Retirement Income Series of blog topics will seek to do that.
Ground rules: This series is going to assume that you consider yourself financially ready for retirement, and any questions surrounding having enough money to retire have already been answered. It also is going to assume that you have already decided when to take Social Security, pensions, and any other regularly recurring income you may be eligible for in retirement. These resources don’t have to be started yet, but we’ll assume you know your age at which you will begin receiving them.
The first thing to realize is that deciding to enter retirement and use your life’s savings to live off for the rest of your days is a huge shift in perspective. In our company we joke with clients that it’s like you have an invisible switch on the back of your neck that you never knew about. It is called the “worry about money” switch. When you are on your final glide path into retirement, that switch gets flipped on because at some level of consciousness you start to realize that whatever amount you’ve saved up is likely to be all you will have for the rest of your life. When you cut your lifeline to the working world, you probably can’t go back…or at least you likely don’t want to.
Studies suggest that one of the biggest fears that many retirees have is running out of money before running out of life.1,2 Easy math would suggest spending conservatively is likely to fix this problem. But there’s another fact to consider - you can’t take the money with you. Whatever happens to us humans when we leave this planet, any wealth we leave behind is going to pass on to someone else for their use. Maybe that’s what you want; maybe it’s not! We work with many clients who tell us, in a perfect world, they would spend down their assets so that on their deathbed their last check bounces. How do you achieve that perfect timing if that’s your goal? We’re going to try and help you figure it out.
In this Retirement Income Series, we’ll discuss:
The 4-step planning process that’s key to ultimately determining the retirement income and withdrawal plan that fits you. These steps include:
Begin with the end in mind: what’s your ultimate nest egg goal?
Understanding different withdrawal methods that tell you how much money you can take out.
YOUR retirement building blocks and when and how to use them for maximum effect.
Tying these 4 steps together effectively is what most of the random financial articles about making portfolio withdrawals are missing. But the information needed doesn’t end there, so next we’ll overview:
Item 5: The mechanics of making those withdrawals. Think about it: most of the places where you hold your accounts don’t tell you how to take money OUT. For many retirees, when they retire is the first time they ever access these accounts other than making deposits. Knowing HOW to do it as easily as possible is helpful. Avoiding costly mistakes and frustrations is another key item.
Item 6: If you’re retiring before the age of 73 then most withdrawal choices are under your control. After that age, the IRS has their own plan for you to take money out, called Required Minimum Distributions (“RMDs”), or Minimum Required Distributions (“MRDs”). We’ll overview important basics and other more nuanced rules you may not be aware of but will want to know to optimize your withdrawal strategy.
Item 7: Finally, we’ll cover strategies and optimizations you can consider if you project extra money that will be left over at the end of your earthly journey. We’ll include techniques to consider if you want to do one or more of the following: leave legacy to heirs, gifting during your lifetime, charitable giving, or spending more on yourself.
So, stay tuned to our Retirement Income Series! Our goal is to help you optimize and maximize your wealth, to give you the retirement withdrawal insights you seek for living your life in retirement as you desire. The right approach is both a science and an art.
Footnotes:
IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Paragon Wealth Strategies, LLC [“Paragon”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Paragon. Please remember that if you are a Paragon client, it remains your responsibility to advise Paragon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Paragon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Paragon’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.wealthguards.com. Please Note: Paragon does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Paragon’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Also Note: IF you are a Paragon client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.