From our research, the most pressing issue as retirement looms for successful corporate executives and small business owners is re-creating your paycheck during retirement.
There are many aspects involved in creating your retirement paycheck, many of them quite complicated and complex. The process must start with determining how much money you will need, before tax, during retirement to maintain the lifestyle you are accustomed to living.
Your goal is to cover your monthly expenses, minimize your income taxes and keep as much money working for you tax-deferred. Using your diversified portfolio of assets, a withdrawal rate that is sustainable for the rest of your life is determined. Your withdrawal rate will be applied to your portfolio and investments that are the most tax advantageous will be used to draw from to create your cash flow.
Once the cash has been created through rebalancing of your portfolio, the cash is transferred to your bank account, in essence, creating your retirement paycheck.
The process of creating your retirement ‘paycheck’ can be simplified into these steps:
Step 1: Asset Consolidation
The first step is to take your Employer Retirement Accounts – your 401ks, SEP IRAs, etc. and ‘roll’ the assets into the appropriate IRA, ROTH IRA accounts. Now all of your retirement assets are located in, at most, five accounts instead of spread amongst many. The five accounts would most likely be the following for a couple – JNT (taxable) account, an IRA for each and a Roth IRA for each. This consolidated set of accounts will greatly simplify your investments.
Step 2: Quarterly Account Rebalance
Every quarter your accounts will be rebalanced with your cash needs in mind. Through the rebalancing process each quarter, cash will be made available for you and transferred into your Taxable Account.
Step 3: Monthly Paycheck Created
From the cash created in step two, money is transferred from your Taxable Account into your personal bank account. This is your Retirement Paycheck and the money funds your living expenses during retirement.
Working with a knowledgeable wealth management professional will help ensure you do not miss out on opportunities, keep you informed, and make the necessary adjustments as your situation changes. It will also make sure the wealth management process and the following areas are addressed: wealth enhancement, wealth transfer, wealth protection and charitable giving.
It can be overwhelming to prepare for retirement as an executive or an entrepreneur. A wealth management firm can help you work through all of your options.
To learn more about how to plan for retirement as an executive or entrepreneur, read our White Paper.
Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail email@example.com.
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