Retirement Income Planning Frequently Asked Questions

The “safe” withdrawal amount depends on multiple factors specific to your situation:

General Guidelines:
Traditional: 4% of initial portfolio value (adjusted for inflation)
Conservative: 3.0-3.5% for early retirement or high security needs
Moderate: 3.5-4.5% for typical retirement scenarios
Higher: 4.5-5.0%+ for later retirement with guaranteed income

Your Specific Rate Depends On:
Age and expected retirement length
Asset allocation (stocks vs. bonds)
Other guaranteed income sources
Spending flexibility
Risk tolerance
Current market valuations

We calculate your specific sustainable withdrawal rate through comprehensive analysis rather than applying generic rules.

For most retirees, we don’t recommend income-only strategies. Here’s why:

Limitations:
Current yields are low—requires very large portfolio
Forces concentration in dividend-paying stocks (poor diversification)
May not keep pace with inflation
Less tax-efficient than capital gains
Dividends can be cut during downturns

Better Approach: Total return strategy allowing broader diversification, better tax efficiency, and flexibility.

Exception: If you have very large portfolio where yields alone provide adequate income without concentration risk, income-only approach may work.

Key Strategies:

1. Use Sustainable Withdrawal Rate: Don’t take more than your portfolio can support
2. Maintain Appropriate Asset Allocation: Need growth assets for inflation protection
3. Build Cash Reserves: Avoid selling during market downturns
4. Stay Flexible: Ability to reduce spending temporarily if needed
5. Maximize Social Security: Higher guaranteed income reduces portfolio stress
6. Monitor Regularly: Annual reviews catch problems early
7. Professional Planning: Comprehensive modeling and ongoing management

Bottom Line: Running out of money is preventable through disciplined planning and execution.

Market downturns are inevitable, having a plan is essential:

Immediate Response:
Don’t panic sell: Worst thing you can do
Use cash reserves: This is why you have them
Maintain asset allocation: Resist urge to sell stocks entirely

Tactical Adjustments:
Potentially reduce discretionary spending temporarily
Draw from bonds/cash instead of stocks
Consider temporarily delaying large purchases
Look for rebalancing opportunities (sell bonds, buy stocks on sale)

Long-Term Perspective:
Markets have always recovered (though timing varies)
Your strategy should be designed to survive downturns
This is normal market behavior, not catastrophic event

Why Planning Matters: We build strategies specifically designed to weather market volatility without panic decisions.

General Timeline:
Before Age 59½:
Generally avoid (10% early withdrawal penalty)
Exceptions exist (72(t), disability, first home, etc.)
Use taxable accounts if needed

Age 59½-73:
Can access retirement accounts penalty-free
Strategic withdrawal opportunity
Consider Roth conversions in low-income years
Taxable accounts often used first (tax efficiency)

Age 73+:
Required Minimum Distributions begin
Must take RMDs from tax-deferred accounts
Coordinate with other income sources
Strategic tax management essential

Optimal Approach: Depends on your complete tax and income situation, requiring personalized analysis.

Strategic coordination maximizes total after-tax lifetime income:

Delay Social Security, Use Portfolio Early (Often Optimal):
Withdraw from portfolio ages 62-70
Delay Social Security to 70 (8% annual increase)
Results in higher guaranteed income later
Lower portfolio withdrawal needs long-term
Opportunity for Roth conversions in low-income years

Take Social Security Early, Preserve Portfolio:
Claim at 62-67
Use Social Security for living expenses
Minimize portfolio withdrawals
May make sense if poor health or immediate income need

Simultaneous Approach:
Claim Social Security at full retirement age
Supplement with portfolio withdrawals
Middle-ground approach
Often used but may not be optimal

Our Analysis: We model different scenarios showing total lifetime income under each strategy, considering your specific situation.

Both, strategic balance is key:

Cash Reserves (1-3 Years Expenses):
Emergency fund
Buffer for market downturns
Near-term planned expenses
Peace of mind

Invested Assets (Remainder):
Long-term growth for inflation protection
Income generation through total return
Wealth building for later retirement years

The Balance:
Too much cash: Inflation erodes value, insufficient growth
Too little cash: Forced to sell investments at wrong times

Our Recommendation: Typically 1-3 years in cash/short-term bonds, remainder invested according to your asset allocation.

Annual Reviews Minimum:
Portfolio performance assessment
Actual spending vs. projections
Tax situation review
Withdrawal rate sustainability check
Strategy adjustments if needed

Review After Major Changes:
Significant market movements (±20%)
Health changes
Family situation changes
Inheritance or windfall
Tax law changes
Large unexpected expenses

Ongoing Monitoring:
We provide quarterly performance reports
Annual comprehensive planning review
Access to us throughout the year for questions

Why Regular Reviews Matter: Life changes, markets evolve, tax laws adjust, your income strategy should adapt accordingly.

Short-Term Needs:
Use cash reserves (this is their purpose)
Consider timing of withdrawals (tax efficiency)
Evaluate if truly necessary vs. want

Long-Term Higher Need:
Reassess withdrawal rate sustainability
Consider part-time work to supplement
Explore expense reductions in other areas
Potentially adjust expectations or timeline

Major One-Time Expense:
Plan in advance when possible
Spread withdrawal across multiple years (tax efficiency)
Consider which accounts to use
Evaluate impact on long-term sustainability

Our Process: We help you evaluate trade-offs and find solutions that work for your situation.

You can manage your retirement income strategy on your own, but working with a financial professional may offer additional benefits.

Challenges of DIY Planning
Coordinating multiple income sources effectively
Navigating complex tax rules and optimization strategies
Determining sustainable withdrawal rates
Maintaining discipline during market volatility
Staying current with changing tax laws
Managing sequence-of-returns risk

Potential Advantages of Professional Guidance
Comprehensive modeling and scenario analysis
Strategies designed for tax efficiency
Behavioral coaching during market fluctuations
Ongoing monitoring and plan adjustments
Expertise in retirement-specific risks
Identifying opportunities for cost and tax efficiency

When Professional Help May Be Valuable
You have multiple income sources to coordinate
Your portfolio is significant and mistakes could be costly
You want a strategy designed for optimization, not just adequacy
You value expert guidance and a structured approach

Working with a professional does not guarantee outcomes, but many retirees find that informed guidance can help improve confidence and decision-making.