How Do I Get Income From My Portfolio?

As an attorney or?law firm owner , you’ve likely spent a lifetime building a successful career and saving for the future. Now that retirement is on the horizon, though, you may be wondering how to turn your hard-earned savings into everyday income. Fortunately, there are a number of strategies to address this question. In this guide, we’ll talk about the top 4 tips for drawing down your investment portfolio and how to maximize your retirement savings.

1. Determine How Much You Can Safely Withdraw & Automate Your Transfers

Before making any decisions about?how?to withdraw from your portfolio, it’s crucial to first understand?how much?you can safely withdraw. The last thing you want is to withdraw too much based on a rule of thumb and risk running out of money later in retirement. There are a number of factors to consider when determining your withdrawal amount, including long-term goals, lifestyle expenses, expected life span, and healthcare needs. Working with?a qualified financial professional ?is a great way to determine the right amount for your needs.

Once you have determined how much you can safely withdraw, consider setting up automatic transfers. This can help you stay on track with your retirement plan and avoid overspending and impulsive financial decisions.

2. Spend Your Taxable or Pre-Tax Investments First

You may not think much of it, but the order in which you withdraw from your investment accounts can significantly impact the longevity of your portfolio. In general, it’s best to spend your taxable accounts first, followed by your tax-deferred (pre-tax) accounts, and finally your?tax-free (Roth) accounts last .

Spending your taxable accounts first can help minimize your tax liability in retirement. This is because withdrawals will be taxed as capital gains rather than ordinary income as long as the underlying investments were held for longer than a year. This strategy also allows your investments to grow tax-deferred longer.?

Once you have exhausted your taxable accounts, you can begin withdrawing from your tax-deferred accounts. Since these accounts are subject to ordinary income taxes, it’s important to plan your withdrawals carefully to mitigate the tax hit.

Finally, once you have exhausted your taxable and tax-deferred accounts, you can begin withdrawing from your tax-free (Roth) accounts. Withdrawals from Roth accounts are not subject to income taxes, making them a valuable source of tax-free income for future use.

3. Don’t Forget About Long-Term Growth

Many people are quick to assume that retirement means your portfolio must become ultra-conservative, consisting only of cash and bonds as a way to safeguard against market volatility. While your portfolio should become slightly more conservative, you still need assets geared toward long-term growth.??

As tempting as it is to invest solely for income, avoid investing your entire portfolio in income-producing assets like bonds or dividend-paying stocks. The interest payments received can fluctuate wildly from year to year and your payments are unlikely to keep up with?inflation .?Dividend investing also has some major disadvantages , including higher fees and taxes, as well as questionable historical performance.

For attorneys and law firm owners looking to maximize their retirement savings, we recommend investing in a diversified portfolio that includes both income and growth-style investments. Of course, the specific allocation that’s right for you will depend on your individual financial goals, risk tolerance, and other factors. This is something we can help you determine at?Wurz Financial Services .

4. Divide Your Portfolio Into Buckets

Another strategy for optimizing your portfolio longevity is to?divide your savings into different buckets to match different time horizons . Each bucket has investments tailored to that time horizon in terms of asset class, risk level, and liquidity.

One common approach is to divide your portfolio into three buckets:?

• A?short-term bucket?is invested conservatively in cash, bonds, and other low-risk assets. This bucket is for your expenses over the next 1-3 years.
• A?medium-term bucket?is slightly more aggressive, investing in a mix of stocks and bonds to generate growth and income over the next 3-10 years.
• A?long-term bucket?takes on much more volatility by investing primarily in stocks or other growth-oriented assets for expenses that are 10-plus years away.??

By dividing your portfolio into buckets, you can potentially generate income from your medium-term and long-term buckets while ensuring you have the funds you need for near-term expenses. Keeping the long-term bucket invested in growth assets also increases your odds of keeping pace with inflation over time.?

Optimize Your Withdrawal Strategy

Though each strategy makes sense on its own, the best way to optimize your portfolio in retirement is to use a combination of strategies specific to your unique situation. At?Wurz Financial Services , we specialize in helping attorneys and law firm owners navigate retirement and maximize their wealth.?

Schedule a no-obligation consultation, and together let’s find out if we’re the right people for you to depend upon during your journey to a comfortable retirement. Contact us at 859-291-9879 or?[email protected] ?today!?

Also, join us at one or all of our free webinars:?

• Social Security 101 : The 3 Rules to Maximize Your Lifetime Retirement Benefits!?
• Will I Have Enough to Retire?
• Retirement Planning Strategies for Solo & Small Firm Attorneys?

About Darren

Darren Wurz is a fee-based financial advisor and co-owner of Wurz Financial Services, where he operates the Northern Kentucky/Cincinnati office. He is a CERTIFIED FINANCIAL PLANNER? professional and has a master’s degree in financial planning from Golden Gate University. Darren specializes in serving the unique financial planning needs of attorneys and law firm owners. He is the host of?The Lawyer Millionaire?Podcast ?and author of?The Lawyer Millionaire: The Complete Guide for Attorneys on Maximizing Wealth, Minimizing Taxes, and Retiring with Confidence , published by the American Bar Association.

Darren is a member of the American Bar Association and the Financial Planning Association. He is also active in his local community as a member of the Northern Kentucky Bar Association, Cincinnati Bar Association, Covington Business Council, and Northern Kentucky Chamber of Commerce. To learn more about Darren, connect with him on?LinkedIn .