Clients are often nervous about transitioning into retirement from the working world, but we are here to help. Our Fiduciary Investment Advisors are experienced in all aspects of retirement planning and can help put you at ease as you enter your next phase of life. Here is one of the most common questions we address for clients as retirement draws near.


What’s The Best Way To Draw From My Savings Once I’m No Longer Working?

While there is a practical answer here, what’s often underlying this question is the anxiety one feels knowing that paychecks are going to stop. Indeed – this is scary and we can sympathize. Most likely, you’ve been gainfully employed since you left school 30, 40 or even 50 years ago and there has been a paycheck deposited into your bank account regularly since you can remember. When those paychecks stop, you’ll have to start withdrawing from your savings, but you may not be sure how to approach the issue.

If you are not yet at the age where you have to take required minimum distributions from IRAs and other tax-qualified accounts, then the general rule is to draw from your after-tax savings accounts first. Those accounts would be your checking, savings, investment and brokerage accounts. You draw from these first because it makes the most sense from a tax perspective. Worst-case scenario, if you have to sell an after-tax investment to raise cash for spending needs then you may realize a capital gain, but capital gains are taxed favorably compared to ordinary income rates. Likely, when you sell an investment you realize a gain and also receive your cost basis back – which isn’t subject to any taxation. For these reasons we counsel clients to draw from after-tax accounts before they reach age 70 because it helps minimize taxes and allows the tax-qualified accounts to continue to grow.

Once you reach age 70 . we modify this approach so that required minimum distributions are withdrawn first. After all, since the IRS requires you to take a certain portion out of your tax-deferred IRAs and retirement accounts (which are subject to ordinary income tax rates) it makes sense to live off of these withdrawals before you take money out of your after-tax accounts. It is simply a change in order of withdrawal.

These are the general rules. Your specific circumstances may require a little more investigation and planning, and we are happy to work with you and your tax preparer to ensure withdrawals are made in such a way to keep your tax burden at a minimum.

Now – about that paycheck. One of the most important features of our Unified IncomePlan® is that we create a paycheck-like experience for you. We link one of your investment accounts at Unified Trust to your bank account and send you a monthly distribution so that you will have sufficient funds to pay your bills. We know that, psychologically, there’s more to that paycheck than the amount of the funds. There’s comfort and peace of mind knowing you have regular income and that we are managing your withdrawals in the most tax-efficient manner possible. If your outlook changes, your FIA will adjust your plan accordingly, because the goal is that you have reliable income for life. You work hard to get to retirement. We can help you make the most of it. .

Questions about retirement? Contact Patrick Meyer, patrick.meyer@unifiedtrust.com or 859-514-3350

About Patrick Meyer view all posts

Patrick Meyer is the Director of Wealth Management Client Services for Unified Trust Company. He joined Unified Trust Company in 2009. He has over 20 years of experience and manages the teams that support the Wealth Management division’s sales, service and trust administration functions. He serves on the Wealth Management Trust Investment Committee and is leading projects to advance Unified Trust’s retirement income solutions.