Take a Closer Look at Your Portfolio

As you get closer to leaving the workforce, it's imperative to have a plan in place that clearly spells out how to manage your income, assets and expenses during your retirement years. As part of this process, it's helpful to understand some of the challenges you may face, as this will impact your plan and help you maintain a disciplined approach as you move through your golden years.

Two key considerations are the timing and the amount of your withdrawals. As shown in the chart below, losses in your portfolio in the early stages of retirement can undermine your long-term plan. If at all possible, you'll want to limit your withdraws early on if the market is declining, as this can take a toll on your overall nest egg for years to come. Market losses later in retirement have less of a consequence on your financial security.

Early Losses in Retirement Can Undermine Your Long-Term Goals

Also pay close attention to the amount you withdraw every year. As discussed in Plan for the Longest Retirement, the amount you plan to withdraw every year should be based on having a lengthy retirement. That way, you're less likely to deplete your savings. In addition, if you take out too much money from your retirement nest egg, you run the risk of outliving your assets. This is demonstrated in the graph below. Even a 1% difference in your withdrawal rate can have a large impact on the amount of time until your assets are depleted.

High Withdrawal Rates Can Deplete Your Assets

Action Steps

Work with your financial professional to develop a strategy for how much and when you should make withdrawals from your retirement nest egg. He or she can also explain how liquidating assets in a tax-efficient manner can also help preserve your wealth, as you’ll generally pay lower taxes on transactions resulting in capital gains versus ordinary income. In addition to the guidance from your financial professional, MainStay Investments offers a number of tools to help. To learn more, call 800-MAINSTAY (624-6782).