• Geoff Wells

Decumulation Strategies – What Are You Missing?

Congratulations!  You have finally retired after saving diligently over your whole career.  One question still remains – what is the best way to take out the money that you have saved?

The decumulation stage of retirement is arguably the most important and easiest to mess up.  With the large amount of money at risk and the emotional shift from saving to spending, it is easy to see how mistakes can be made. There are many different strategies we use as advisors to maximize after-tax returns during the decumulation phase.  The most common considerations are shown below:

  1. Plan many years in advance for retirement withdrawals and gifting.

  2. Maintain an average tax bracket and reduce income spikes in a single year.

  3. Optimize the timing of Social Security, pensions, Required Minimum Distributions (RMDs) and capital gains.

  4. Optimize which account retirement withdrawals come from.

  5. Take advantage of state retiree tax deductions.

  6. Consider Traditional to Roth IRA conversions.

With all of the complexities listed above, the optimal decumulation strategy is unique to each situation.  In addition, tax laws, health conditions, retirement goals and risk appetite can all cause the ideal strategy to change over time. This is why annual financial plan reviews are important.