Wealth Preservation: Withdrawals and the Health of Your Portfolio

As your portfolio growth varies over the years, it can be hard to tell what amount you can withdraw and still maintain the health of your portfolio. Laura Kuntz CPA/PFS, MBT, explains how her firm thinks about when and how to withdraw from your portfolio as it decreases and increases in value over the years.

Transcript:

One of the most important parts of wealth preservation is how much a person withdraws from their portfolio every year. It's hard to tell exactly what that amount should be because a portfolio goes up and down in value. One year it might seem like it can be a lot and another year it might seem like it should not be a lot. In fact, when we're looking at that area, we use the analogy of seven years of fat and seven years of lean. What we actually need to do is bank some of the moneys during the seven years of fat to deal with the fact that it might not be seven years of lean, but some amount of lean years. When a person is taking portfolio withdrawals that are just a little too much every year, the portfolio can deplete over time and it's kind of sneaky. 

It might not seem like the portfolio is depleting because we might be in the seven years of fat, but in fact truly it is. That is a vulnerability in some financial plans and is an area that we need to look at and pay attention to and monitor closely and dialogue with our clients about. On the other hand, with many of our clients, we have the joy of saying feel free to spend more money, gift more to your favorite charities or your children, you have a wonderful strong financial situation. 

Make sure your financial advisor really understands you and what is important to you and can advise you properly on the right balance of portfolio withdrawals for you, so that you can do exactly what you want to do, whether it's travel or funding a grandchild's educational account or anything that is important to you or gives you joy.