By Ted Stricker, CFP®
Like you, we know that retirement isn’t about trading in a briefcase for a beach chair—it’s carefully managing your financial resources to support your golden years. But when it comes to preserving and growing those resources, when you take your money out is just as important as how you save it. Why? Because withdrawal timing can significantly affect your financial comfort down the road.
Different elements—like investment returns, economic instability, and the different tax treatments of income sources—each add their own unique challenges. Retirees often find themselves wincing at past decisions, especially when they face hefty tax bills due to poorly timed withdrawals.
So, what do you need to be most aware of? Let’s take a look at key retirement asset withdrawal strategies for portfolio preservation and growth.
Why Timing Matters
Before getting to the strategies, we need to understand why timing matters so much. First, there’s the tax impact. Making early withdrawals might seem like a relief at the moment. But they can easily lead to long-term regret if they result in high tax bills or insufficient funds in later years. Strategic withdrawals can help manage your taxes more efficiently, potentially saving you a significant amount in the long run.
Second, timing also affects investment returns. If you’re forced to sell investments during a market downturn to fund your living expenses, you may lock in those losses and jeopardize the long-term growth potential of your portfolio. On the other hand, withdrawing during bull markets may allow you to capitalize on gains and sustain your retirement lifestyle.
Finally, as people live longer in retirement, the risk of outliving your savings grows. This really drives home the importance of getting the timing right for withdrawals to maintain financial stability as you move into your later years. In the end, timing isn’t just a detail—it could mean the difference between a retirement that thrives and one that merely survives.
Now, on to the top retirement asset withdrawal strategies for portfolio growth and preservation:
Sequence Your Withdrawals for Tax Efficiency
If you’re considering when to tap into your investment portfolio, keep in mind that the strategy behind these decisions—how you do it—is just as important as picking the perfect moment. So, how crucial is it for retirees to understand tax implications when planning withdrawals? The short answer: extremely.
That’s because the order in which you withdraw funds from different retirement accounts can significantly affect how much you owe in taxes each year. For example, taking from a tax-deferred account versus a Roth IRA can significantly increase your tax burden—and that higher tax bill can eat away at funds earmarked for your future.
This is where seeking professional advice tailored to your situation can really make all the difference. A financial advisor can help you find ways to manage taxes more effectively and even extend the lifespan of your portfolio.
Balance Risk and Return With Proper Timing
Gaining (and maintaining) financial stability in retirement requires a delicate balance between risk and return. It’s important for retirees to keep a close eye on market volatility to safeguard their retirement portfolio for years to come.
If your aim is to manage risks and promote sustainable growth, then a well-structured portfolio that emphasizes diversification and a balanced asset allocation can help. With a well-diversified portfolio, you’re better positioned to preserve capital when markets tumble and find growth opportunities when they soar.
Plus, paying attention to how the economy is doing and adjusting your plan based on things like changes in interest rates can really make a big difference. Ultimately, the choice depends on a number of key factors, such as how much risk you’re comfortable taking and your individual financial goals.
Avoid These Common Withdrawal Pitfalls
There are a few common misunderstandings around retirement asset withdrawal strategies that can cause retirees to miss out on significant tax benefits—or worse, risk their savings. By far, the biggest misconception is the one-size-fits-all approach. Every individual’s financial situation is unique, so why should your withdrawal strategy be like anyone else’s? That’s why it’s so important to have a personalized financial plan.
Another pitfall to watch out for is underestimating the impact of taxes. Being strategic about withdrawals in lower-income years, such as making larger withdrawals or considering Roth conversions, can help you navigate this challenge. By doing so, you might find yourself in a lower tax bracket and optimize your financial resources for the long haul.
Align Estate Planning Goals With Withdrawal Timelines
When advising on the best times to withdraw from retirement accounts—especially for those with significant assets—integrating estate planning into your retirement asset withdrawal strategies can be a game-changer For most, it comes back to preserving wealth for your family and supporting causes close to your heart.
Coordinating withdrawals with estate planning goals means organizing how you withdraw money from your retirement accounts alongside your plans for passing on your wealth after you’re gone. With this goal in mind, you can look to lower the taxes your heirs have to pay and potentially leave behind a bigger legacy for them. This way, your money can contribute to your family and the causes you care about most—even after you’re not around to manage it anymore.
When to Withdraw? Let’s Decide Together
When it comes right down to it, your golden years should be just that—golden. That’s exactly why timing your withdrawals right can make all the difference in portfolio preservation and growth. As you weigh these decisions, remember this: personalized advice tailored to your specific circumstances is the key to unlocking a financially stable and fulfilling retirement.
That’s where we can help! At Bernath + Rosenberg, we offer custom withdrawal strategies to help preserve and grow your portfolio. Our team of over 100 specialists in accounting, tax, and wealth management is ready to provide strategic insights tailored specifically to your retirement needs.
Connect with us today to schedule a personalized consultation at (212) 221-1140 or email [email protected].
About Ted
Ted Stricker is a partner and CERTIFIED FINANCIAL PLANNER™ at Bernath + Rosenberg, a full-service accounting, tax, and wealth management firm with offices in Monsey, NY, Lakewood, NJ, Cedarhurst, NY, and Miami Beach, FL. The firm demonstrates a personalized approach to custom-tailored solutions and an unwavering commitment to client service. With over 26 years of experience in the financial services industry, Ted manages the firm’s wealth management team, and specializes in designing financial plans for business owners and affluent families. Since joining the team in 2015, he provides practical and sound advice, combining innovative approaches and solutions that reflect clients’ personality, lifestyle, and goals.
Ted obtained a Bachelor of Science in Economics & Business Administration from University at Albany. He also holds the CERTIFIED FINANCIAL PLANNER™ designation as well as the Series 7, 24, 55, 63, 65, and NY Life & Health licenses, and is a member of the Financial Planning Association. To learn more about Ted, connect with him on LinkedIn.
