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Ask Dave

An Exit Strategy For Retirement?

Ron wants to know what the exit strategy is when you reach retirement age and you have assets. Where and when do you liquidate those?

QUESTION: Ron in Los Angeles wants to know what the exit strategy is when you reach retirement age and you have assets. Where and when do you liquidate those? Ron has several million dollars in real estate and stocks and bonds. Dave says his plan isn’t to liquidate but just to draw enough from investment incomes to live.

ANSWER: Congratulations! You’ve done an excellent job. I have a little bit of a different view than some of the classic financial planning minds on this. A lot of those guys tend to move toward very conservative things like money markets or bonds or things like that as soon as you hit age 65 or something along those lines. Instead, my idea is that when you’re 65, if you’re in good health, statistically, there’s a very good chance you’re going to live up into your 90s, because the average death age of females is 78 and for males 74, but that includes infant mortality. Once you make it to that age, you’ve still got 30 years to outpace inflation and make this money last—hypothetically.

With that in mind, I don’t liquidate. I’m 50, but my plan is not to liquidate but instead to just either draw enough off of rental incomes or investment incomes to live. People kind of have this mindset that we have to liquidate it all, put it in this lump thing, and then just do different things with the lump thing. Instead, why don’t we just pick off pieces that we need? You can do some piecemeal things and pluck some of the feathers off the goose, but you don’t have to shoot the goose. Live off of some of the feathers as well, and as far as leaving it, you can decide how to leave it however you’d like. Some good estate planning is way past in order if you haven’t already done it.

In your case, you really need to look into a charitable remainder trust, which is where you can donate the money or property to charity now and not count against your estate exemptions but live off the income until you die. You get to keep the income off it. You get to keep the property—managing it, handling it—but when you die, the property is not yours; it’s theirs. That’s a charitable remainder trust. That’s one piece you can use in your estate planning.

I think it’s okay to dance with the girls who brought you here as far as your investments go.