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Wealth Management in Retirement

While the fundamentals of retirement planning remain the same, today’s savers are faced with issues different from those of previous generations. One of those challenges is a longer life expectancy, which means that retirement savings must last longer, perhaps into your nineties. Moreover, many companies are switching from defined benefit pensions to defined contribution plans, the former of which guarantees a specific amount of money in retirement, while the latter is more subject to market ups and downs. Add to this the health crisis resulting from the pandemic, and the situation is far from simple.    

In a situation like this, even the most affluent individuals have no choice but to manage their wealth wisely. If this sounds like you, connect with Pillar Wealth Management, a reputable wealth management company that specializes in serving investors with $5 million to $500 million in liquid assets. If your wealth exceeds $5 million, reading our guide titled 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning should give you a tremendous start.

Meanwhile, this guide will offer in-depth insight into wealth management in retirement. Let’s begin with answering the question, “Why should you plan for retirement?”

Why Should You Plan for Retirement?

Retired couple on vacation

To Make Better Decisions

As you grow older, life hands you a lot of important questions. More often than not, the answers are not straightforward. Some of the biggest decisions you may need to make could include:

  • Can I afford to build or purchase a vacation home at a desirable destination?
  • Should I stay in my job or launch my own business?
  • Is it rational to pursue a professional path or degree later in my career?
  • How should I fund my child’s education?

Since such life decisions can significantly affect your finances, it’s critical that you plan for them. When you know where you are in your retirement plan, you can approach such big decisions with more confidence. To learn more about how early retirement planning helps improve your financial decision-making, schedule a video consultation with our wealth managers today!

Better Health

Money issues are a major source of stress. A study by the American Psychiatric Association reveals that over 70% of adults are worried about finances, which ultimately takes a toll on their physical health. Stress that stems from financial worries has been linked to poor sleep, diabetes, headaches, heart disease, and migraine. Fears about poor financial health can also lead to depression and anxiety, depriving you of the peace of mind you may possess today.

Getting started with retirement planning today can thus be a critical step toward improving your financial wellness, which can in turn be beneficial for your emotional and physical health.

Keep Your Tax Liability to a Minimum

If you aren’t careful, taxes can eat up a massive part of your retirement savings and income. This is another reason why retirement planning is important. Don’t wait for retirement. Start planning during your working years, but the strategy should change once you retire. For example, your income might be relatively stable as long as you’re working, but you may lack control over your sources of income, so your priority should be to find tax credits and deductions.

When you retire, you should have more control over your income sources and be able to minimize your tax burden. You may have tax-deferred income sources (pension plans, pre-tax IRAs, and 401(k)s), tax-free income sources (municipal bonds, Roth IRAs, and Health Savings Accounts (HSAs)), and tax-managed income sources (standard brokerage accounts with index funds and other tax-efficient investments). If you’re a high net worth individual with more than $10 million in liquid assets, this guide should be of great help to you.

Now that you understand the importance of planning for retirement, let’s find out how to manage wealth in retirement:

How to Manage Wealth in Retirement

Money piled up on a table

Wealth management in retirement is about ensuring that your savings offer sufficient income to support your needs and that they don’t fall short while you’re still living. This largely involves establishing and maintaining a retirement portfolio. The amount of money you possess at the beginning of your retirement years is the key to managing those assets at the time of retirement.

With a bulky portfolio, the income generated may be enough so that you don’t need to utilize your principal to cover any expenses. In this case, the investments you start with in retirement can include a combination of treasury bonds, CDs, and other banking products, as well as dividend-generating stocks.

However, most retirees start with a more uncertain nest egg that, at some point, requires them to tap into their principle. They will need to determine how much should be withdrawn and from which account(s). Another critical factor is the amount of risk they should incur to grow their nest egg.

The following principles of wealth management in retirement should make these decisions easier for you:

Risk Reassessment

As retirement approaches, consider re-evaluating your investment risk. Among the critical factors in risk assessment is the timeframe. Since you could lack the time for recovery from any downturns in the market, it should be useful to see whether your investment in securities with high risk is greater than it should be.

Similarly, you don’t want price changes to reduce your purchase power, or in other words, fall victim to inflation. To ensure that your money lasts through your life, you should certainly reassess your risk. This includes:

  • Determining the impact of withdrawing money from your retirement accounts on their capacity to produce income: When deciding what to do with any specific account, you’ll need to look into your income sources and assets, your unique circumstances, and the impact of taxes.
  • Knowing how diversified your income sources are: In certain cases, you need to diversify your investments to protect your retirement income.

While these points should give you a fair idea about risk assessment, to learn more about the process, schedule a video consultation with our wealth managers today!

Making the Principal Last

One of the most important goals of wealth management in retirement is to make your principal last for as long as you need it. This requires a disciplined approach to spending. According to financial experts, you should never overspend during the first few years of retirement, and if your retirement portfolio suffers losses in a particular year, you should cut back on extras.

Another effective way to stretch your retirement income is to properly manage your yearly withdrawals from the principal of your retirement portfolio. Although there isn’t any definite proportion for how much you withdraw from your nest egg every year, most advisors suggest a 3% to 5% range. Most financial specialists settle on the fact that at the beginning of retirement, one should withdraw conservatively because even a well-diversified portfolio can be subject to significant fluctuation from year to year. This way, the portfolio will have a chance to recover should the market become unfavorable.

Taking inflation into account when withdrawing money is also a prudent strategy, adding an inflation rate into your yearly withdrawals. Keep in mind that declining investment returns combined with rising expenses can adversely impact how long your money lasts. Thus, you should keep both these aspects in check and make changes to your set withdrawal rate accordingly. If you have more than $5 million in wealth and are worried about consuming the principal, learn how to plan for retirement from our guide titled 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning.

Asset Allocation

It’s crucial to develop and maintain in your investment portfolio an asset mix you think will provide the returns you need at the risk level you can tolerate. This asset allocation process is critical because different investment categories work in different ways in varying economic conditions.

Instead of relying on a single type of security, consider spreading out the investment principal across different categories, so that if one performs poorly in a given period, the others that perform well can offset it. Each investment type has unique risk factors, features, and ways investors can use them.

To secure your income and manage expenses, your portfolio should include two types of investments, namely, growth investments and income-producing investments. Let’s study them individually:

Growth Investments: If you want your retirement portfolio to outpace or at least keep pace with inflation, you should target growth investments like individual stocks and mutual funds. While these are subject to greater price fluctuations than income-producing investments, they grow much more rapidly than the overall market or their peers.

Income-Producing Investments: These types of investments generate the money you need to live on after retirement. Examples include bank products like bonds and CDs and stocks that pay dividends.

The process of adjusting asset allocation during retirement should be gradual. This might be required to accommodate a change in economic conditions or address a change in lifestyle. To learn more about how to set up the right asset allocation, schedule a video consultation with our wealth managers at your convenience.

Earning Through the Sale of Investments

If the value of your investments is now higher than what you paid for them, you can earn money by selling them. Although taxes aren’t normally a big consideration when making investment decisions, they should be taken into account when selling investments. The profit you earn on the sale will be subject to capital gains tax. Plus, the broker who handles the transaction may need to be paid a commission.

If the investment you’re selling was held for over a year, you’ll owe a capital gains tax rate of 0%, 15%, or 20%, depending on your tax bracket. If, however, the asset was held for less than a year, the rates that apply will be the same as ordinary income tax rates, which are typically higher.

Hence, unless you have off-setting capital losses, selling too many of your investments in a particular year can cause your tax burden to increase, so plan ahead for whether or not you should sell equities to generate income.

Furthermore, if you’re selling assets in an account that has been deferred for taxes, the situation will be different. The profits earned on sold investments won’t be subject to any tax, yet you’ll need to pay transaction costs. When it’s time to withdraw money from your account, taxes will apply to the withdrawn amount. If you hold assets worth more than $5 million and wish to make solid gains by selling them, be sure to read our guide titled 7 Secrets to High Net Worth Investment Management, Estate, Tax, and Financial Planning first.


After going through this guide, you should have developed a profound understanding of wealth management in retirement. However, the greater your wealth, the more challenging the process can be. If you’re a high or ultra-high net worth individual, hire a wealth manager from Pillar Wealth Management, which specializes in serving investors with $5 million to $500 million in wealth. To get started, book a video consultation with our team today!

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