Turning Retirement “Savings” Upside Down

You have spent years learning about how to “save” for retirement. Save first, spend later.  Dollar Cost Averaging.  Asset allocation and rebalancing.  In the United States, you have put money into your IRA, or your employer sponsored plans and contributed to Social Security.  You have built equity in your home or your business has prospered.  This is not a column about my beliefs around how the retirement narrative is changing, and we need to prepare for a world we won’t recognize.  However, there will be a time in life when you need to ebb away from “saving” into “spending” as your life season changes.  You need to shift from a “pile” mentality to a “payment” mindset.

Moving forward, you need to create an income strategy to address liquidity needs, lifestyle desires, longevity uncertainty and legacy efficiencies.  As we are still immersed in a COVID haze, a simple small step to look at an income strategy for 2021 will empower you.

TWO PRONGED APPROACH – How much and where from?


A good way to look at income planning in your retirement years is  – how much do you need to receive for a paycheck and how much for a playcheck?  This is discerning between financial needs and desires and you want to address each separately.  What are your fixed expenses?  Roof over your head, food on your table, clothes on your back.  Out of pocket medical, insurance premiums, and other expenses are necessities.  Everyone has different perspectives on what is considered as “necessary”.  It is your personal journey of discernment.  You do want to make sure that your necessary expenses are covered by guaranteed income sources so that you can sustain them no matter how long you live.  Social Security, pensions and annuities can provide you with lifetime income.   Then there is the “playcheck.” What are the desires you want to incorporate in your life? Again, some have more, others have less.  An exercise I walk clients through is aligning their spending choices with their core values.  You want to be intentional with your spending, which is getting more difficult every day.  Once you break how much you need for next year, you want to look at where will it come from.


Picture buckets of assets – both financial capital and human capital.  For 2021, if you are retired (fully or partially) and you have connected with what your fixed and variable expenses are, the next step is to maximize what you can get out of each bucket.  Financial capital are the assets you have built up over a lifetime.  Retirement accounts, brokerage accounts, home equity, rental real estate, business assets, life insurance cash value, annuities, Social Security, pensions, to name a few.  Human capital would include the opportunity to earn income in some way.  This may include part time work, or engaging in the “gig” economy.   These buckets are not created equal!  There are taxation elements of turning on a spigot from any of these.  Taking income from an IRA is taxed as ordinary income.  A Roth IRA comes to you tax free.  Cash values from insurance policies can be accessed tax efficiently.  If you sell your primary residence, you can take $500,000 in gain if you are filing jointly, or $250,000 in gain filing single tax free. You want to consider what tax environment we are in.  Right now, we have low tax rates.  With COVID and possible administration changes, how these buckets are taxed may change.

What you take and where you take it from impacts the long-term sustainability of your assets.  It is no longer just a matter of having them, it is knowing how to optimize the income you can receive from them.  Stay strategic and intentional, educated and empowered. This leads to freedom to pursue your passions and purpose as you live out this fulfilling time of life.

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