What is a Retirement Drawdown Strategy? 4 Tips to Make your Money Last

Many of us spend decades building up a retirement nest egg. But when it comes time to retire, how do you transition from saving to smart spending without risking running out of money? Financial advisor Kyle shares his top 4 drawdown strategies to help ensure your savings lasts throughout retirement.

1. Minimize Taxes on Retirement Income

Right now, tax rates are relatively low historically, especially compared to the national debt situation which suggests taxes will likely rise in the future. Kyle recommends taking advantage of today’s lower rates by drawing down pre-tax accounts while you’re in a lower bracket, rather than waiting until required minimum distributions potentially bump you into a higher tax bracket. Doing Roth conversions in low-income years can also let you benefit from paying taxes on retirement income now, rather than later at potentially higher rates.

2. Make the Right Social Security Claiming Decision

While you can model different Social Security claiming ages to try to maximize your benefit amount, Kyle cautions there are other personal factors to consider beyond just the math. Your health, family longevity history, and surviving spouse benefits can all impact when the optimal time is to claim Social Security. He advises working with a financial professional to stress test different Social Security claiming scenarios within the context of your broader retirement income plan.

3. Choose the Right Pension Payout

For those lucky enough to have a pension in retirement, you’ll need to evaluate whether to take a single life or joint/survivor payout. Consider your spouse’s income sources in retirement and who is likely to outlive the other, as opting for the higher single life payment could leave a surviving spouse without adequate income. Discuss with a professional to see if a joint pension payout better aligns with your retirement drawdown needs.

4. Balance Guaranteed Income With Growth

While sources like Social Security and pensions provide guaranteed lifetime income, you’ll also need your retirement savings invested for growth to keep pace with inflation. Kyle notes historically a balanced portfolio allocated to stocks has been the best way to participate in economic growth. He advises retirees have an appropriate asset allocation that provides security through reliable income sources today, along with equity exposure to enable savings to continue growing throughout a potentially decades-long retirement.

There are lots of variables to think through when transitioning from saving to spending in retirement. Working with a financial professional can help provide confidence your drawdown strategy addresses your specific needs and priorities in order to make retirement income last. Reach out to Kyle at First Coast Financial Group if you would like assistance creating a retirement drawdown plan tailored to your situation.

 

If you’d like to find out if you’re on track to retire early, please feel free to give Kyle a call at 904-288-0103 or set up a complimentary appointment here: Schedule a Meeting