Retirement Withdrawal Strategies and Preserving Your Legacy

Chris Maurer |

Retirement planning not only provides you with future income security but also helps build a legacy of wealth that extends to your loved ones. To ensure your retirement savings are sufficient and your wealth has a multigenerational impact, consider implementing a sound withdrawal strategy that helps maximize your nest egg. The dedicated team of financial planners at Park Place Financial proudly provides clients with personalized financial plans that meet their long-term goals. Here, we explore various retirement withdrawal strategies that can help preserve your quality of life and legacy. 

Systematic Withdrawals 

With a systemic withdrawal method, the principal you place in investments remains in the account throughout your retirement. You can only withdraw the income you obtain from dividends or interest. Although your yearly income may fluctuate, you will always have money in a retirement account with the systematic withdrawal method. This security allows you to have some financial resources to pass on to your beneficiaries. 

Dynamic Withdrawals

While some retirement withdrawal strategies are based on set dollar amounts or percentages, the dynamic withdrawal method allows you to alter how much money you take from your accounts each year based on variations in the market. Dynamic withdrawals typically come with annual spending maximums and minimums. These caps permit you to remove more money from your account when returns on investments are higher. They also allow you the option to withdraw less money, leaving you with more funds to invest in legacy savings. 

Postponing Social Security Collections 

Besides retirement savings accounts, many people rely on social security to generate income. You may be inclined to start receiving social security right away, but waiting may allow you to collect more over time. Delaying Social Security benefits may also provide an opportunity to take advantage of tax planning strategies like Roth conversions. Once you hit retirement age, you receive an extra percentage of benefits for every year you delay collection until age 70. The additional income you earn by waiting to collect social security payments keeps you from withdrawing from personal accounts and ultimately leaves you with more money to offer your heirs after your passing. 

The Bucket Strategy 

The bucket strategy involves dividing your savings into multiple accounts ("buckets") based on your living expenses. You might hold one year’s worth of living expenses in a personal savings account and store several years' worth of expenses in various investment accounts. This strategy allows you to draw from your savings account and refill it using your other buckets when your investments perform well. It can prevent you from needing to sell stocks or utilize other accounts to pay for emergencies. Instead, you retain income in multiple places to pass on to your beneficiaries. 

Legacy Vehicles 

Some people do not need to rely on their IRAs for income except to satisfy their required minimum distributions (RMDs) each year. If this describes your financial situation, consider using a legacy planning vehicle to provide for your heirs. 

Utilizing the RMDs from an IRA account, you can contribute to a 529 college savings plan for your children or grandchildren. This plan enables you to help your family afford college costs even after your passing. You can also use surplus RMDs to purchase a life insurance policy to protect your spouse and provide your children with death benefits. Bear in mind, your children or a permanent trust must own the policy to ensure these benefits remain estate and income tax-free. 

Roth IRAs 

 Roth IRAs provide a place to take tax-free income in retirement. Contributions to a Roth IRA are made with after-tax dollars, and the funds accrue tax-free. In addition to contributing to a Roth IRA, funds from a Traditional IRA can be converted to fund the Roth account. The amount of the conversion will be taxed as ordinary income in the year you convert the funds. Evaluating this tax planning strategy early in retirement, during your low income years, can reduce your taxes later in retirement. Roth IRAs are particularly beneficial in preserving your legacy because they remain tax-free once they're passed down to your loved ones.  

Whole Withdrawals and Inherited IRAs

You may also allow your beneficiaries to take a complete withdrawal from your IRA. If your heirs do not need money right away, they can transfer the funds from your account into an inherited IRA. This type of account is often referred to as a “stretch IRA” because it permits your beneficiaries to retain tax deferral benefits for the rest of their lives but also gives them the ability to liquidate the entire account if necessary. 

Discuss Legacy Planning with Park Place Financial 

It can be challenging to determine the right withdrawal strategy for your situation, especially if you want to secure your income while preserving funds for your loved ones. When it comes time to make these important decisions, turn to Park Place Financial for assistance. Our heritage wealth planning services can help you discover the best ways to pass on wealth according to what you value most and leave a lasting impact. Reach out to us today to learn more about retirement withdrawal strategies and how they can help you preserve your legacy.