In this episode of ThimbleberryU, Jon “JAG” Gay and Amy Walls tackle one of the biggest fears for retirees: running out of money before they die. They delve into the critical topic of deciding from which accounts to draw money in retirement, illustrating the profound impact these decisions can have on one's financial stability.

Amy emphasizes that this concern often leads people to adopt an "ostrich" mentality, where they bury their heads in the sand to avoid facing daunting financial decisions. Jon adds that this behavior is a form of fight or flight, driven by fear and unfamiliarity. They agree that simply winging it can be a costly mistake.

We introduce a case study to illustrate these points. They discuss a hypothetical couple, both aged 60, with different types of savings: $40,000 in cash, $600,000 in taxable investments, $2 million in IRAs, and $200,000 in Roth accounts. They compare the financial outcomes of spending $85,000 versus $100,000 annually in retirement.

• For $85,000 in annual spending, the optimal strategy involves withdrawing 45% from taxable accounts and 55% from IRAs.
• For $100,000, the best approach shifts to 60% from taxable accounts and 40% from IRAs.

Deviating from these strategies, even slightly, can significantly impact financial outcomes.

• Using the $85,000 strategy for $100,000 in spending could result in $400,000 less in available funds by age 95.
• Using the $100,000 strategy for $85,000 in spending could lead to $300,000 less.

The consequences are even more dramatic when retirees choose to withdraw 100% from either taxable accounts or IRAs.

• Drawing solely from taxable accounts until depletion could result in $740,000 less by age 95.
• Withdrawing entirely from IRAs could lead to $1.5 million less.

We underscore the importance of dynamic financial planning, which involves regular reassessment of one's strategy to adapt to changing circumstances and ensure efficiency. Amy concludes by stressing that thoughtful distribution strategies are essential not only for maintaining financial stability but also for achieving personal goals, whether it’s enjoying life, covering unexpected expenses, or leaving a legacy.

For listeners seeking personalized advice, Amy encourages reaching out to Thimbleberry Financial for guidance tailored to individual circumstances.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.