Practices to Help Avoid Capital Depletion in Retirement

I vividly recall the horror of approaching the limits of my strength and conditioning while on a winter mountain climb years ago, and yet far from safety. It was a crushing revelation that I had overestimated my preparation and misjudged the physical requirement of the expedition, and as a result, was faced with an extremely life-threatening situation. It has been reported by Doc Eifrig, a retirement income specialist and partner at Stansberry Research, that the greatest fear of most American retirees is running out of money too soon, yet many do! Consider the following practices as you plan your own financial homestretch:

• Plan your retirement meticulously, giving consideration to every detail, for “which of you, desiring to build a tower, does not first sit down to count the cost, whether he has enough to complete it?” ~Luke 14:28.
• Consider part-time employment during the early to mid-years of retirement, realizing every dollar earned is a dollar not withdrawn from retirement capital accounts.
• Maintain a strict budget and practice counter-culture frugality, realizing every dollar not spent is a dollar not withdrawn from retirement capital accounts.
• Accelerate repayment of debt, and don’t fully retire until you “owe no one anything” ~Romans 13:8. Retiring in debt is like trying to swim the English Channel with twenty-pound boots on. ?
• Keep investment expenses to a minimum, realizing every dollar of lower expenses remains invested and continues compounding!
• Avoid catastrophic risks, from which you may never recover. As Warren Buffet said, “Rule #1 is don’t lose money; Rule #2 is don’t forget Rule #1”.
• Consider strategic Roth Conversions in early retirement, in particular, after full employment and before Required Minimum Distributions (RMD’s) begin, when your tax bracket is likely lowest.
• After RMD’s begin, keep the money invested (after withholding occurs) when possible, realizing every dollar not withdrawn remains in your retirement capital accounts.
• If still employed after RMD’s generally begin, roll former retirement plans into your present employer’s retirement plan to further defer RMD’s.
• Refrain from buying and selling homes during retirement, an expensive endeavor which involves complicated planning and unpleasant financial surprises.
• If your only permanent fixed income source in retirement is Social Security, consider allocating a portion of your retirement capital towards a second permanent income source, which you can’t outlive.

Knowledge is power, and there is much you can do to avoid the horror I experienced on that mountain; that said, it’s even more important to know that “God is the provider for all of his creation and gives food to every creature” (Psalm 136:25). Blessings on your retirement planning efforts! Shaun.

“A wise man leaves an inheritance to his children’s children.” ~Proverbs 13:22

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The opinions voiced in this material are general, are not intended to provide specific recommendations, and do not necessarily reflect the views of LPL Financial.

All investing involves risk including the possible loss of principle. No strategy ensures success or protects against loss.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.