How to be Ready When the Paychecks Stop Coming


February 2, 2015


JRW_WW.jpgRetirement-time was near for one of my client-couples. Their finances were in excellent order. So why did the looks on their faces betray so much concern as they walked into my office? The truth is that retirement can bring new types of worries. This was one of those.


The husband had been working since he was 22. In addition to substantial personal wealth, the couple had social security and a small pension from when the wife worked as a nurse. But the social security and pension checks would not be enough to cover living expenses. The problem was the couple had spent a lifetime accumulating, and had done it well, but they didn’t know how to go from accumulating to distributing. In other words, how do we take all those accounts they’ve built up (IRAs, brokerage, etc.) and turn them into the monthly income they would need to live on in retirement, after the paychecks stop coming in?


The first thing I told them was that since their retirement was well provided for, it was good problem to have! And it was also easy to solve. There are various approaches. For instance, some try living just on interest and dividend checks. I don’t recommend that. Hopefully your retirement will last a long time, and your income could vary considerably as dividends and interest rates go through their cycles. I also don’t favor approaches that order assets for sale based on liquidity. That’s too arbitrary. You need to keep your asset allocation aligned with your risk tolerance.


I have a different approach I recommend, called the “Paycheck System.”


Periodically, in a market-wise, tax-wise fashion, we select enough of your assets to liquidate to cover living expenses for the next six months. Then we have the broker send you regular checks, either monthly or every two-weeks, just like when you were working. Dividends and interest payments keep getting reinvested at the appropriate risk tolerance, just like when you were working. When the next six-month period approaches, we do the same thing again. It makes for a very seamless transition to retirement, so you can start enjoying it right away.


The couple left my office that day without the worry they’d arrived with. That’s what I strive for with all my clients. Our job at PARTNERSINWEALTH is to serve as your financial sounding board for all financial matters, while also getting all of your family’s advisors on the same page. This takes the guesswork out of your finances so you will rest easy and enjoy life. To learn more about us, please contact Jim Waters, CFP®, at 713.964.4028 or