Managing Liquidity in Retirement
Enjoy Today, Stay Secure for Tomorrow
Nearly every retiree faces a similar dilemma: figuring out how to live life to the fullest without outliving their money. Frivolously burning through cash isn’t the soundest strategy, but neither is locking up too much of your money in long-term investments. The goal is to strike the right balance between liquidity and growth, keeping enough cash available to fund the lifestyle you want while continuing to invest for long-term needs.
As you work with your advisor to make a sound plan for retirement, here are a few key concepts to consider:
- Plan in phases: Your spending habits will naturally change over the years. One common way to envision retirement is to break it up into three phases – “go-go” (the early years when you’re active in travel and leisure activities); “slow-go” (when you’re settling down and not quite as mobile); and “no-go” (when you may experience more limited mobility). With these in mind, you can begin to think about your lifestyle (travel, hobbies, relocation, etc.) in each phase along with any major goals like giving to charity or leaving an inheritance. While your plans won’t be set in stone, they will give you a sense for how much cash you’ll need every month versus how much to invest for the future.
- Organize your cash flow: In retirement, your regular paycheck may be replaced by a sporadic mix of income from investments, a pension, Social Security, annuities or required minimum distributions from IRAs or a 401(k). At times, it may not seem like enough, while other months may leave you flush with excess cash. Using the right types of liquid accounts, which may include a mix of money markets, CDs and treasuries, a wealth advisor can help organize your various income sources into a consistent amount each month. This can help to ensure you have enough cash available while your funds continue to earn a return.
- Get tax-savvy: Once you stop working full-time, your tax bracket may change, and the order in which you draw down retirement accounts and other savings could impact how much income tax you owe. Hence, your tax strategy could make a significant difference in how long your nest egg lasts. For this reason, it’s crucial to work with both your tax advisor and wealth advisor who can advise you how to adjust your strategy as your circumstances evolve.
Any way you look at it, retirement planning is a complex process. Contact Brad Clark at 214.515.4870 or Brad.Clark@frostbank.com to help you make the most of the wealth you’ve built.
Investment management services and trust services are offered through Frost Wealth Advisors of Frost Bank. Investment and insurance products are not FDIC insured, are not bank guaranteed, and may lose value. Brokerage services offered through Frost Brokerage Services, Inc., Member FINRA/SIPC, and investment advisory services offered through Frost Investment Services, LLC, a registered investment adviser. Both companies are subsidiaries of Frost Bank. Additionally, insurance products are offered through Frost Insurance. Deposit and loan products are offered through Frost Bank, Member FDIC. Frost does not provide legal or tax advice. Please seek legal or tax advice from legal and/or tax professionals.