BEFORE YOU RETIRE – Four Money Questions To Ask

May 25, 2021

So you’ve saved all you can for retirement. And now it’s time to figure out how to withdraw those assets. Here are five questions to ask yourself to figure out a strategy on spending your retirement income and avoid withdrawing too much, too soon.

Once you stop earning paychecks, asset growth may slow as you begin taking income from your retirement account. Which is fine; it’s what you’ve been working for your whole life. But it is important that you develop a plan to prudently draw down from that mountain of assets. Without a plan, you could withdraw too much, too soon, and run out of money during retirement.

To create a smart retirement income plan, consider these four questions:

Question One: How long should you expect to live?

On average, a man who reaches age 65 today can expect to live to age 84, while a woman can expect to live to 86 ½. Bear in mind that those are statistical averages. In reality, one out of three 65-year-olds today will live past age 90; one out of seven will live past age 95.[1]

For a woman, the odds of outliving her husband are strong. Not only can she expect to spend more years in retirement, but she must prepare for the fact that medical and long-term care bills for her or her husband could impact her future income.

These expenses can devastate the financial security of a surviving spouse. This is one of many reasons why it’s important to consider all types of financial vehicles, including insurance options, to help ensure that a nest egg isn’t drained due to long-term care expenses or the death of a spouse.

Question Two: How Much Will the Cost of Living Increase During Retirement?

Inflation can have a stronger impact on retirees compared with the rest of the population. That’s because retirees tend to spend a higher percentage of their household budget in categories that experience higher inflation, such as medical and long-term care.

Question Three: When Should You Retire?

Obviously, the age at which you retire depends on several variables, including if you enjoy your job and want to work past the normal retirement age and whether your health or your employer gives you a choice. But, another factor that not everyone considers is what could be going on in the investment markets when you’re nearing retirement. This is important because you typically want to avoid retiring just after or during a market decline.

Remember that the three years before and after you retire will likely be when you have the most in retirement assets so choosing to retire during a market decline can significantly impact your retirement assets early in retirement – which can reduce your long-term income during retirement. If the market is in decline, it may be prudent to delay retirement until the market recovers so that your portfolio does not suffer from an initial negative sequence of returns. And delaying retirement may not be such as bad thing – by continuing to work a few more years you may also be able to increase your level of income from Social Security benefits.

Question Four: Where should you place your money?

As a general rule, retirees should transition some portion of their portfolio to more conservative accounts to help protect themselves from market loss. Since there are a variety of circumstances that should be considered, it’s best to consult with an experienced financial advisor to develop a tailored distribution plan. With that being said, you may want to start with determining how much income your portfolio needs to provide each year to supplement Social Security benefits and any other income sources. Consider allocating a portion of assets to a liquid account to help pay for periodic expenses such as homeowner’s insurance and property taxes as well as an emergency fund. Also think about investing a portion of your retirement portfolio for long-term growth opportunities to help offset the impact of inflation and the chances that you live a long time. Look into ways to diversify your investments to help minimize risk of loss. And you may want to be flexible with regard to your annual withdrawal rate; you may want to save excess money withdrawn in years when the market produces higher returns and reduce your withdrawal rate in down years — using those prior savings to supplement your income.

The last thing I want to share is that accumulating enough money for retirement is just half the journey; the other half is making that money last as long as you do. Be sure to consult with a financial advisor to map out a detailed plan on how to withdraw from your retirement assets. And if you don’t have a financial advisor or a financial plan. Don’t worry! You can always call us. Our team of financial advisors are available for a quick call or a complimentary no-obligation meeting. You can find us at https://eabuck.com/.


[1] Social Security Administration. “Benefits Planner: Life Expectancy.” https://www.ssa.gov/planners/lifeexpectancy.html. Accessed July 5, 2019.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 902028- 5/21.

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