working or whether they work part time ;
• Whether they receive unpredicted windfalls in the form of bequests or gifts ; and
• When they begin collecting Social Security and start their RMDs .
For example , it can make sense for some 65-ish retirees to take larger withdrawals from brokerage and savings accounts . This allows them to :
• Defer collecting Social Security until age 70 ;
• Wait to draw from retirement accounts until it ’ s mandated ; and
• Allow those accounts to continue to benefit from interest accruing and investment gains .
It ’ s worth noting that the economy and the markets can throw a wrench into the needs when they ’ ve reached more advanced ages .
• As households transition into retirement , they can take higher account withdrawals while they wait for retirement income from Social Security and the required distributions from their retirement plans to partially replace earned income .
• Households with tax-advantaged retirement accounts — IRAs , 401 ( k ) s and the like — as well as taxable brokerage accounts can reduce their expected lifetime taxes on IRA withdrawals by aiming to achieve a constant taxable income ( corrected for the retirees ’ marital status ).
• Households with small investment accounts should buy at least one income annuity with survivor benefits but without a long period of guaranteed payments . This
It ’ s worth noting that the economy and the markets can throw a wrench into the best laid plans retirees have for regular withdrawals at any percentage . annual withdrawal level when they begin retirement — in order to prepare for the period later when the aging survivor must increase withdrawals to maintain a home and lifestyle and possibly in-home or facility services .
Regular Meetings
You ’ re going to have to meet with your clients regularly , because figuring out appropriate withdrawal levels is an ongoing process . The amounts will actually vary over the course of their retirement and depend on a few factors :
• Whether the couple have both stopped best laid plans retirees have for regular withdrawals at any percentage . For example , in the past few years , people who committed to a level of withdrawal may have struggled to pay drastically higher costs for food , housing , fuel and other basic living expenses .
Samuelson ’ s Formula
I ’ ve made my point : A tidy solution ignores the caprices of life and the inherent complexity of retirement income management .
Nevertheless , I will defy H . L . Mencken ’ s warning about neat solutions with a few of my own , strategies that offer wise savers a high batting average for success :
• Healthy individuals should put off filing for Social Security until they are 70 . Advisors can help them with ideas about how to do this . By delaying , they will collect significantly more in Social Security benefits over their lifetimes .
• Healthy individuals should also work as long as they can to shore up their savings and capacity to meet their will provide a low-cost , reliable retirement income stream and peace of mind .
• Married people should understand all the household investments and retirement income sources they and their spouses hold , because one of the spouses will eventually have to carry on alone . As an advisor , you can help with that . If there is a reliable child or other trustworthy relative , they should be included in the conversations .
Get ready . This year marks “ Peak 65 ,” when more boomers turn 65 than in any year past . Retirement is on their minds : In Allianz Life ’ s recent “ 2023 New Year ’ s Resolutions Survey ,” more than one in five workers said they would likely retire in 2024 . Among boomers still working , 31 % said they would likely retire in 2024 .
The work of accumulating assets can seem easy when compared with the work of unwinding them . But your advice is as necessary as ever . Please don ’ t fall victim to the notion that any of it is neat .
PAUL R . SAMUELSON is the chief investment officer and co-founder of LifeYield .
JANUARY / FEBRUARY 2024 | FINANCIAL ADVISOR MAGAZINE | 51