Transitioning to Retirement: Keys to Making the Big Pivot


Bubba Holloway, CWS is senior vice president, Regions Private Wealth Management

Plan Early and Often—While is never too early to start thinking about retirement, the most important planning for your transition into retirement should start at least five to 10 years in advance.

Early planning gives you time to catch up—or adjust your retirement date—if your savings and investment strategy is inadequate. It also allows you to start investing in different types of accounts—taxable, tax-free and tax-deferred—that will give you more flexibility in retirement.

Planning is also a chance to consider full details of your retirement picture. When and where will you retire? Will your home be paid off, or will you have a mortgage or rent? Diving into these details will help create a long-term spending and investment plan.

After you create your plan, you should revisit it at least once a year.

Consider a Stress Test

Do this by first determining the gap between your reliable, paycheck-like sources of retirement income, such as pensions and Social Security, and the amount you plan to spend. Most people should expect to spend about as much as they do now.

That gap is where your investment portfolio comes in. Evaluate that portfolio and see how much of a hit it could sustain from a prolonged bear market while still providing you with the monthly income you’ll need. See how that same portfolio would serve you in a conservative low-risk, low-return scenario, factoring in inflation. Consider “longevity risk,” or what would happen to your plan if you live far longer than you expect.

These tests should help ensure you’re taking a reasonable amount of risk to keep your portfolio growing enough to fund your goals.

Make Your Withdrawals Tax-efficient

Ideally you will have savings in several types of accounts by the time you retire, such as IRAs and 401(k)s, Roth IRAs and taxable accounts. When you start pulling money to live on, you want to keep an eye on which account the money is coming from to manage your income tax rate. After all, it’s not how much you have, it’s how much you keep—after paying Uncle Sam—that matters.

In years that you are going to spend more, you might want to dip into Roth IRAs, which provide tax-free withdrawals. In years that you spend less, you can take more out of accounts that are taxed more heavily, since you’re still likely to be in a lower tax bracket.

Be Smart but Flexible

Life has a way of throwing curve balls. If something big happens—you get divorced or are diagnosed with a serious illness—seek out your advisors right away.

Being proactive is important and the key to managing life changes.

While the commentary accurately reflects the opinions of the author, it does not necessarily reflect those of Regions Bank. This presentation is solely for information and educational purposes and nothing contained in this presentation constitutes an offer or solicitation to purchase any security, the recommendation of any particular security or strategy or a complete analysis of any security, company or industry or constitutes tax, accounting or legal advice.  Commentary and opinions provided in this presentation reflect the judgment of the author as of the date of this presentation and are subject to change without notice.

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