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Wealth Management for Retirees: 3 Steps To A Stress-Free Retirement

Skip the analysis paralysis and retire with confidence

Retirement doesn’t have to be complicated.

Retirees enjoying morning coffee on porch
Couple on Porch enjoying Coffee

I see too many folks get analysis paralysis when it comes to planning their own retirement. They think they have to get every single detail right, otherwise they’ll end up penniless and on the streets.

The fact is, it’s just not true. You can’t let perfect be the enemy of good. If you wait for the perfect plan, you’ll never retire.

Instead, focus on getting to 80%.

80% is a stress-free retirement.

What do I mean? The Pareto Principle that states 80% of benefits come from 20% of effort. It’s an interesting idea that holds true across many fields, including retirement planning.

In retirement planning, you can get 80% of the benefit from 20% of the effort by focusing on three main keys.

  • Live within your means

  • Stick to your investment plan

  • Be tax-smart with your withdrawals

Pretty simple, right? Retirement planning doesn’t have to be complicated to be successful.

Let’s break these down.

Retirees Should Live Within Their Means

Most people worry about running out of money in retirement to some extent.

The viewpoint changes from my retirement account is just some money to I don’t have income now and my retirement account is all that I have.  

I’ve actually told more clients they’re not spending enough than I have that they’re spending too much. The reality is you worked for 30+ years to build your nest egg and you should enjoy it. You can’t take it with you.

So back to living within your means; you want to find the right balance of spending, but not too much.

What’s the right balance?

Start with 4-5% of your portfolio per year. You can take 4-5% of your total investments out each year for living expenses and reasonably expect to not run out of money. (I explain how HERE)

Add that to your guaranteed income like Social Security, VA Disability, or other pension income, and you have your spending. If you’re spending more than that, you’re likely not living within your means.

In short: 4-5% of your total investments + Social Security + pension is your annual spending. Don’t spend more than that.

Retirees Should Stick with Their Investment Plan

From 1996 till 2015, the average investor underperformed the S&P 500 by 6.1% per year. They underperformed bonds by 3.2% per year. They underperformed gold by 3.1% per year. In fact, they underperformed every major market index by a significant amount.

I want to put that into perspective.

$100,000 invested for 20 years with the average investor’s return of 2.1% annually is $151,535.66.

$100,000 invested for 20 years in the S&P 500, averaging 8.2% annually, is $483,665.62.

See the difference? Just investing in the market would have tripled the portfolio over twenty years.

So why does the average investor underperform?


Instead of buying low and selling high, they buy high and chase returns. Then they sell low after the market drops, locking in their losses.

What’s the solution?


Build your investment plan and then stick with it.

Not sure what an investment plan should look like? Here’s my breakdown of an efficient portfolio. It doesn’t have to be fancy to be successful.

In short: Turn off CNBC and ignore the news. Don’t chase the hottest investment trends. Build your portfolio and stick with it for the long haul.  


Wealth Management for Retirees Includes Being Tax-Smart With Withdrawals

I can talk taxes till I’m blue in the face but I’m not going to do that. I just want to note how important taxes are to wealth management for retirees.

Instead, just remember a few points.

  • Non-Qualified then Pre-Tax then Post-Tax

  • Minimize your lifetime tax rate

  • Fill up your 10% and 12% buckets with Roth conversions, specifically prior to age 73.

If you take nothing else away from this section, focus on the first point. When you’re taking withdrawals from your portfolio, start by withdrawing from your non-qualified money.

Once you’ve exhausted that, begin taking distributions from your Pre-Tax money, which is likely your Traditional IRAs or 401(k)s. Save your Post-Tax accounts, your Roth IRA and 401(k)s, for last. You want to let the tax-free money grow as long as possible.

Beyond that, you want to pay taxes when your rate is lowest. Often I see CPAs recommend tax strategies which minimize taxes in the current year but essentially raise the overall rate a few years in the future…which is short-sighted. I build retirement income plans for my clients which minimize taxes over the course of their lives, not just in a given year. These usually include Roth conversions and other strategies.

Finally, if nothing else, strongly consider filling up your 10% and 12% tax buckets each year.

You can do this by taking capital gains (at a 0% Long-Term Capital Gains rate!) or by converting Traditional IRAs to Roth accounts. Either will likely save you in the long-term.

In short: Plan your withdrawals by taking from your non-qualified accounts first, then your Traditional IRAs and 401(k)s, and lastly, your Roth IRAs and 401(k)s. Lock in a lower lifetime tax rate by filling up any extra space in your 10% and 12% tax brackets.

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