Which Assets In Our Retirement Portfolio Should We Spend Down First

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    You ever ask yourself or someone else a question about something you felt was important, only to realize you might not be asking the right question? Or came to realize that the answer was going to entail a heck of a lot more than what you were anticipating?

    Here’s an example:

    “What’s the right way to go about spending down your assets in retirement?”

    This is probably a situation where you’re not asking the correct question in terms of what you really need to find out to serve your purpose, as well as finding the answer to be much more entailed then you might have anticipated.

    In asking the question you were probably hoping for a simple, straightforward answer. Do this and you will be all set.

    Truth is there are different ways to do so. Ultimately, you’re trying to figure out what’s the best way to retire efficiently, which is a process.

    What’s certain is that the answer isn’t cookie cutter or based on rules of thumb, but should be based on you as a couple and your unique situation.

    While there are different steps and paths that can be taken by you and your partner that can lead to a successful retirement, there are also some paths or actions that can lead you astray and imperil your financial security as well.

    The key is creating a comprehensive plan that encompasses all phases of retirement, including how much you can spend, taxes you’ll owe and where to take the money from.



    Finding and following the right path in life is a huge issue for all of us. It’s no easy task. Why? Because there are so many options that it’s hard to know which will best suit us and get us where we want to go.

    Retirement is no doubt a big stage in life, so it shouldn’t surprise you and your partner that finding the right approach and path when you are planning to retire can be tough to figure out, especially when doing so on your own.

    Lots of options, and the wrong selections can cost you dearly. You need to realize that much of what you hear about and read aren’t necessarily going to work for you. Cookie cutter advice like spending 4% annually or taking your IRA money out last can lead to bad consequences.

    Fortunately, while there is no one single path toward enjoying a fulfilling and successful retirement, the creation and use of comprehensive retirement plan that you have been a part of creating and understand (we call this connecting with your money) can guide you as to how much you can spend, the taxes you will owe and where the money (income) you live on will come from.

    A plan that will help you live out your retirement with confidence and peace of mind.

    This article focuses on helping you find the right path so you can have a good opportunity to enjoy a successful retirement.


    As with any project or undertaking, you have to have a plan to guide you as you move forward. This is especially true when it comes to having a roadmap that will be one of your key resources in navigating retirement successfully.

    But you can’t rely on any ol’ plan – definitely not one you might have thrown together based on reading some articles and doing a bit of Internet research. And certainly not one put together by a family member or friend that “knows something about finance.”

    Even most financial advisors don’t have the expertise necessary to deal with the complexities of retirement, ranging from passing on assets and other estate issues to social security, the use of trusts to protect assets, ensuring you have lifetime income you can’t outlive, and taxes – namely paying as little to Uncle Sam as possible.

    Frankly, what most think of as a retirement plan is merely a guide you use in terms of saving (what we call the accumulation phase), which will prove inadequate when you actually enter retirement and have to be focused on income and spending.

    Even if you did have one created by a qualified retirement planner you trust, you may want to have it reviewed by a third party so you have peace of mind when the time comes.

    Take stock of what you have and owe

    Okay, you now know you need to check your current plan (if one exists), or you should get with a qualified planner who will work with you to create a comprehensive plan that will guide you in retirement.

    Now what?

    For your benefit, and that of a planner (existing or new), you need to determine on a current basis what assets and tools you have at your disposal in order to move forward in creating a new plan or to alter an existing one, accordingly.

    Assets and tools will include:

    • Cash in banking accounts (or hidden in the backyard or under a mattress)
    • Near cash like CDs and money market accounts
    • Income from a job you might perform in retirement or a company you plan to start at that time
    • All securities you have in non-qualified brokerage accounts (stocks, bonds, mutual funds, ETFs, REITs, etc.)
    • Holdings and/or value of your qualified retirement accounts (IRAs, 401(k)s, pension plans, etc.)
    • Lifetime-income assets (ex. – Fixed Index Annuity or FIA)
    • Home(s) and separate properties or real estate
    • Trusts
    • Inheritance
    • Vehicles
    • Any other type of assets with value

    You will also want to document all your debts, be they credit cards, short-term loans, longer-term such as mortgages, or even business loans you’re responsible for, etc.

    Additionally you will want to determine your pre-retirement expenses and budget, as those will be helpful in putting together a well-planned retirement budget.

    Keep in mind that if you currently spend $8,000 monthly, you are likely to spend close to that amount in retirement monthly and annually in order to pay your bills and maintain your standard of living.

    In taking inventory of all those things, you can begin to move forward into comprehensive planning.

    Share your needs, goals and desires

    When you first started to picture your future together as a couple, you probably talked about many things you hoped to do and achieve.

    And you’ve probably spent many years since then working toward making those things happen as a couple, including possibly starting a family, educating kids, supporting each other in your careers, helping others, participating in charitable causes, visiting nearby and far away locales, etc.

    You probably also envisioned a day when you could retire and settle into your golden years, doing things you wanted to do with one another.

    This probably includes things such as living where you want, travel, enjoying cultural activities or hobbies together and separately (given you have more opportunity to do so), spending time with and caring for grandkids, passing on what you worked hard to accumulate to loved ones and organizations you support, and more.

    You will need to incorporate all of your retirement needs, goals and desires into your comprehensive retirement plan.

    Consider your estate

    That last bit about passing on wealth you accumulated to family and possibly organizations you support is a big one. It’s one thing to want to do so, but quite another to do so in a manner that ensures it can happen as you wish.

    You’ll probably want to control who gets what and when, as well as protect those assets against third parties, lawsuits, creditors, etc. This will involve your “Will and Testament” being in good shape and potentially the use of trusts.

    Equally important is ensuring that the majority of what you wish to pass on remains intact without a major portion being eaten up by taxes. You probably want to ensure your loved ones don’t end up with a big tax obligation as well.

    To accomplish this will certainly require an estate plan created by a qualified financial or retirement planner working with an attorney specializing in these issues if the estate is substantial.

    Even if not a Rockefeller (today we might say Musk), you worked hard to accumulate, so you need to spend some time, effort and money insuring it goes where you want it to in the most efficient manner possible.

    Paying the tax man…and inflation

    Taxes are inevitable in life – death and taxes, as the saying goes. While none us like paying taxes, many often end up paying more than they need to (often 10s of thousands, and more) due to a lack of knowledge regarding complex tax law, and even more so because they don’t know and/or fail to utilize legal strategies that can minimize what’s owed to Uncle Sam.

    In order to avoid paying more than your fair share, and ultimately end up paying the least amount of taxes possible over the course of your retirement, you need to work with a retirement planner who will probably be a tax expert or work with a tax attorney.

    Not doing so almost ensures you will pay more than necessary. The issue of taxes actually goes right to the question of how best to spend down assets in your portfolio during retirement.

    A comprehensible retirement plan by its very nature should incorporate tax planning and strategies that are focused on helping you pay the least amount of taxes possible.

    This includes what sources of income you will tap into (e.g., retirement accounts, brokerage accounts, annuities you might have, social security, other sources of income), the order you will do so, the tax implications, strategies that can be applied, estate, and more.

    One other issue that is as inevitable as taxes is that of inflation.

    You have to account for the fact that while your income will be whatever it is based on the value of your assets, as well as additional savings you might generate through continued investment (or even work in retirement), everything you spend money on will become more expensive going forward, and the dollars you do have will go less far in the future due to inflation.

    As such, accounting for both taxes and inflation should be a major priority in the creation of a comprehensive plan you will need to guide you in retirement.

    Avoid cookie cutter

    Back to the original question of which assets in your portfolio should you and your partner spend down first, you probably now realize there is much more entailed in the answer than what you expected.

    Hopefully it’s clear that cookie cutter just won’t work for you and your partner.

    Just in case, let’s dispel a couple things you’ve probably heard or read in the past.

    • Spend down taxable assets first, tax-deferred second and tax-free last. While there is some logic to this, it is very generic and may cost you dearly in taxes, and fail to ensure you won’t outlast your assets.

    Fact is that as Troy Sharpe (Oak Harvest founder) often points out, holding on to your retirement account assets (e.g., IRAs) too long can lead to a huge tax bill at a point in your retirement that could cost you significantly more in taxes in the year(s) you take distribution from those accounts.

    A better approach may well be to take some each year from different accounts (including IRAs) in a systemized, strategic fashion over the course of your retirement spending.

    • You should plan to spend 4% each year. This is a generic rule of thumb and should never be considered rigid.

    There are many factors that have to be taken into consideration when it comes to determining what your spending rate should be.

    These can include the age(s) at which you and your partner retire, needs and goals, quality of life you’ve maintained and wish to continue going forward, investment performance, risk tolerance, net worth (assets and liabilities), heath and life expectancy, unexpected issues or events, and much more.

    You may wish to splurge one year and take the entire family on vacation, which may cause you to spend more than your allocation for that year.

    That’s okay. You worked hard and saved to be able to do so. But it does have to be accounted for in your plan. Spending less in a subsequent year is a good way to go about doing so.

    Overall, there will be times when you might need to spend more, while in others you don’t need to spend that set percentage. Having a dynamic spending plan that adjusts helps provide confidence so you don’t worry about your spending. And it helps to make your assets last.

    Putting it all together

    Armed with the aforementioned information, you should proceed with what your end goal should be, which is that of obtaining a roadmap that will guide you in retirement.

    We view that as a comprehensive retirement plan that includes and incorporates all the aforementioned elements, which in turn enables the development of a dynamic spending plan that will serve your specific needs well.

    A quality spending plan will guide you in terms of how best you and your partner should go about spending down you assets and in what order, ensuring you have the best opportunity of living out your retirement in a manner that meets your needs, goals and dreams.



    Let’s face it, nobody wants to face a future in which they outlive their assets. That’s why you ask yourself, “How should I spend down my assets,” to begin with.

    As demonstrated, there are way too many considerations and issues to deal with and account for to be doing this on your own.

    We can work with you to create a holistic, comprehensive retirement plan that includes a spending plan that is completely customized to you and your spouse to ensure you have the best opportunity of living out the retirement you envision.

    If you are ready to take the next step and talk to a team of retirement planners who can advise on this and who will put your interests first, Schedule a call today!

    Let Us Help You Achieve the Retirement You Deserve!

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