Achieving A Comfortable Retirement – Part 2

Portfolio Management

Previously, we discussed the psychological difficulties that retirees may encounter as they strive for a comfortable retirement. We will now concentrate on the challenges of creating and managing a portfolio and the measures that retirees can take to overcome these challenges.

Portfolio Positioning

When planning for retirement, investors should adjust their portfolio strategy from a focus on growth to a focus on preserving capital. This is because, during retirement, investment decisions become more crucial as there is less opportunity to recover from any mistakes. While an aggressive approach could provide higher returns, it also comes with higher risk, especially when fresh capital from earned income is no longer available.

To mitigate risk during retirement, it is recommended to maintain a portion of your portfolio in bonds, fixed investments, and cash equivalents, enough to cover 3-5 years of expected cash flow needs (ideally ten years). When investing in stocks, choosing companies with proven business models, consistent free cash flow generation, and a history of paying dividends is important. It is also essential to fully understand these companies and how they perform in different market conditions.

Tax-Efficient Withdrawals

As a retiree, it can be challenging to navigate the tax consequences that accompany various retirement and brokerage accounts. The goal is to withdraw the necessary funds required to maintain your lifestyle in the most tax-efficient way possible.  A retiree’s portfolio typically includes a combination of the following:

  • Pre-Tax retirement accounts (401k’s, IRAs, etc.)
  • Post-Tax/Tax-Free accounts (Roth IRA)
  • Taxable brokerage accounts (Joint and Individual brokerage accounts)

To calculate the tax-efficient withdrawal amount specific to your circumstances, it is recommended to first gather the following information:  1) determine your overall cash flow need, 2) identify any outside sources of cash flow such as Social Security or Pensions, and 3) calculate the cash flow needed from the portfolio to fill the gap between your overall need and outside sources. From there, familiarize yourself with tax brackets (See 2023 Federal Tax Brackets here. Then, structure your withdrawals from the various accounts in a way that keeps your ordinary income tax rate at the lowest possible level while still meeting your needs. 

Structuring a withdrawal strategy that maximizes your tax efficiency should be based on your current financial situation. Be sure to seek the advice of a Certified Financial Planner™ or tax professional for help with your unique circumstances since every investor’s situation is different.


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certified financial planner Marshall Clay wears a gray jacket and white shirt while posing for professional photo in office

Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.


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