Follow Jason Linkedin Facebook
Email Jason Email
Financial
Oct 5, 2021

Your Retirement Portfolio: Simplicity Is Your Friend

Sponsored Content provided by Jason Wheeler - CEO, Pathfinder Wealth Consulting

This article was authored by Kayla Johnson, Financial Planning Associate.

Planning for retirement involves a lot of considerations – replacing your working income, navigating a sustainable withdrawal rate, planning for healthcare costs and long-term care, estate and legacy planning, as well as tax and gifting strategies (RMD-leveling, withdrawal sequencing, Roth conversions, and qualified charitable distributions) can quickly become complex.
 
That’s why when it comes to generating an income from your retirement portfolio, simplicity is your friend.
 
At Pathfinder, the first step we generally recommend is to keep about one year’s worth of spending, that isn’t supplied by income streams like Social Security and pension, in an ultra-conservative investment. This can be advantageous to offset short-term market volatility. This provides a buffer that helps prevent needing to sell during unexpected market volatility if you need quick cash.
 
Next, we typically recommend using tax-deferred money to fund your regular monthly expenses so you can plan your federal and state tax withholdings correctly. Discretionary and supplemental cash needs can be funded with your non-retirement accounts.  You still need to be careful when deciding what and when to sell, as the cost basis and holding period for each position will impact your taxes. Your non-discretionary and discretionary lifestyle expenses will often be funded with a combination of tax-deferred and taxable money, balanced based on careful tax planning.
 
Once your cash position is in place, and you’ve got a tax-advantageous funding strategy for income, you’ll need to create a plan to periodically refill your cash reserves to maintain adequate funding. This is where careful management of your investment portfolio becomes critical to determine a sequence of withdrawals across your varying account types.
 
Often, the largest portion of a retirement portfolio comes from tax-deferred retirement accounts, and because 100% of that money is taxable upon withdrawal, you’ll need to monitor your tax situation closely. Unexpected withdrawals from IRAs and 401(k)s can dismantle a great tax strategy, which is why we typically recommend using those accounts for planned expenses. Taxable funds are usually best used next, if the tax planning merits it. Finally, taking tax-free withdrawals from Roth IRAs and Health Savings Accounts (HSAs) for healthcare costs, is usually most advantageous to access last, particularly for unexpected expenses. However, in higher income years, it may be warranted to withdraw from these accounts first and change your regular distribution strategy.
These guidelines are good rules of thumb, but each year of retirement should be managed with the following in mind:

  1. What do we want to spend to make the most of this year in retirement?
  2. How much do we need and how will it affect the future?
  3. How can we maximize our dollars from an investment and tax perspective?
 
The complexity of retirement can make these decisions as clear as mud, so it’s important to keep it as simple as you can. The biggest financial impacts on your retirement funds will likely be taxes, your withdrawal rate, family, and health. The CERTIFIED FINANCIAL PLANNER™ Professionals at Pathfinder Wealth Consulting have been making muddy financial decisions clearer for over 25 years here locally. If you’re interested in how we can help you navigate the path to and through retirement, give us a call at 910-793-0616 or visit our website at www.pwcpath.com. We are here to guide you forward.
 
 

Other Posts from Jason Wheeler

Pcwpath
Ico insights

INSIGHTS

SPONSORS' CONTENT
Ubs chadpearson headshotresized

The Three Dimensions Of Selling Your Business

Chad Pearson - UBS Decision Point Wealth Consulting
Chris coudriet

A Public Service Profile on the Elements of Building Relationships

Chris Coudriet - New Hanover County Government
Brookeskipper saltair headshot2

Improving Indoor Air Quality Requires a Systematic Approach

Brooke Skipper - Salt Air

Trending News

Avelo Plans New Florida Nonstops Out Of ILM

Miriah Hamrick - Mar 30, 2023

Wawa Gas Station Proposal On City Planning Agenda

Staff Reports - Mar 30, 2023

Despite Banking Headwinds, NCino Reports Steady Growth In Sales

Jenny Callison - Mar 29, 2023

Riverfront Farmers’ Market Returns To Dock Street For 20th Season

Miriah Hamrick - Mar 29, 2023

Tech Roundup: New Software Platforms, STEM-ILM Event And Tech Awards Deadline

Johanna Cano - Mar 29, 2023

In The Current Issue

Info Junkie: Hoop Morgan

Book and media recommendations from Info Junkie Hoop Morgan, founder of The Forte Institute....


New Makerspace Is Born

Doug Hamerski is a nephrologist who likes to spend his free time on other sciences, from circuity to radio. This pastime has now grown to a...


Southport Brisket By Way Of Texas

Open since April 2014, Southport Smoke House has been introducing guests to owner Troy Knight’s home state of Texas brand of barbecue: beef...

Book On Business

The 2023 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2023 Power Breakfast: Major Developments