Tips for Maximizing Retirement Plan Withdrawals

Tips for Maximizing Retirement Plan Withdrawals

One of the biggest challenges for retirees is managing the equities in their portfolios. Historically, equities have significantly outpaced other asset classes, so they offer significant opportunity for growth and can help retirees live the life they always imagined. However, equities do come with significant risk of loss as well, so they must be managed effectively to ensure a successful retirement.

To properly plan for retirement, you must consider several factors, such as income sources, expenses, your personal risk tolerance, a reasonable assumption for the rate of return on your assets, and most importantly, a withdrawal plan that avoids selling equities during periods when the market is down. Here are a few insights and tips into maximizing your retirement plan withdrawals.

How withdrawals can impact your retirement portfolio

Selling equities in a declining market to cover your income needs can negatively alter your retirement income projections. For example, if you have $100, and the market drops by 20% and you withdraw $10, you will have $70 remaining. To get back to $100, your portfolio would need to grow by over 40%.

Equity market performance has been very strong over the last five years, and retirees invested in equities have seen their portfolios rise significantly. The perfect time to evaluate your equity positions in a retirement portfolio is after a strong run. At the time I am writing this article (December 2021), the market is near an all-time high, but there are some looming concerns about the new COVID-19 Omicron variant causing another downturn.

Reducing the need to withdraw during market declines

To help reduce the risk of needing to sell equities during a market decline, I advise my retired clients who withdraw funds from their retirement portfolio on a monthly basis to have 12 to 24 months of income in cash or short-term fixed income on hand. In qualified retirement plans, you can sell appreciated equities and move them to cash or fixed income investment without tax consequences. In the case of a market decline, they can use these funds to cover expenses instead of selling equity holdings when they are at a lower price. They would then have time for equities to recover before needing to sell them to cover future expenses.

Everyone wants a good rate of return with their retirement portfolio. They key to getting of good rate of return in your retirement portfolio is an effective plan for your sequence of withdrawals.

Jason Egge is a Financial Advisor with Securities America, Advisors, Inc. Securities offered through Securities America, Inc., member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Bankers Trust, BTC Financial Services, a division of Bankers Trust, and Securities America are separate companies. Securities America and its representatives do not provide tax advice; it is important to coordinate with your tax advisor regarding your specific situation.

Not FDIC Insured. No Bank Guarantees. May Lose Value. Not a Deposit. Not Insured by Any Government Agency.

Jason Egge

Jason Egge

Vice President, BTC Financial Services (515) 245-2892 Email Jason

Jason Egge joined Bankers Trust in 2004 and has nearly 25 years of experience in the financial services industry. Jason partners with his clients to develop retirement strategies based on thoughtful consideration of their individual needs. He follows through with them, encouraging customers to meet regularly in a comfortable environment to review each unique portfolio, ensuring that their investments meet their changing life needs. Presently, customers have collectively invested more than $90 million through Jason. Their assets include stocks, corporate bonds, municipal bonds, government bonds, mutual funds, ETFs (Exchange Traded Funds), REITs (Real Estate Investment Trusts) and annuities.

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