Beyond Wealth: How Cash Flow Evolves in Retirement

Written by Pam Martin, CFP®, CKA® - Partner, Wealth Advisor on December 18, 2024

Retirement isn’t about stopping – it’s about transitioning into a new financial phase with intention

The Shift from Building to Managing

Retirement represents a turning point, especially for those accustomed to creating and accumulating wealth. For business owners, executives, and professionals, it’s not about relying on a single source of income—it’s about strategically balancing and leveraging diverse sources of wealth to support new goals.

This shift in cash flow is about more than sustaining your lifestyle. It’s about your wealth adapting to new priorities, whether that’s launching passion projects, traveling, or continuing to build your legacy.

1. Reimagining Income: Diverse Streams for a New Chapter

For high-net-worth individuals, retirement income often comes from multiple, carefully managed sources:

Case Study: A Business Owner’s Transition
A couple who built a thriving logistics company decided to sell it as part of their retirement plan. They structured the sale to create multiple income streams:

Ongoing Business Distributions: Instead pf a full exit, they retained a minority stake, receiving quarterly dividends.
Consulting Fees: The husband stayed on as an advisor during the transition, earning a consulting fee that allowed him to stay involved in an industry he loved.
Real Estate Income: Using part of the proceeds, they invested in rental properties to generate predictable cash flow.

Case Study: A Professional’s Balanced Strategy

A high-earning professional, who spent decades maxing out 401(k) contributions and growing a diverse portfolio, approached retirement with a different strategy:

Investment Dividends: Income from dividend-paying stocks formed the foundation of their cash flow.
Tax-Efficient Withdrawals: They began strategic Roth IRA conversions early in retirement to reduce future tax liabilities.
Part-Time Work: To stay mentally engaged, they took on a teaching role, earning supplemental income while sharing their expertise.

Advisor Tip: A diversified income approach allows you to align cash flow with both immediate and long-term goals.

2. Spending Patterns: Adjusting to a New Lifestyle

Retirement spending can evolve in unexpected ways, even for those who have carefully planned their finances:

Case Study: The Active Retiree Couple

A couple who retired early after careers in tech approached retirement with excitement but found their spending shifted significantly:

Travel and Adventure: Their initial budget for international travel grew as they added longer trips and more luxurious accommodations.
Passion Projects: One spouse pursued a long-time dream of starting a photography business, requiring upfront investments in equipment and marketing.

Case Study: A Family-Focused Retiree

A retired corporate executive discovered that supporting family was a key financial priority:

Education Funding: They set aside part of their wealth for their grandchildren’s college funds.
Unexpected Obligations: They helped an adult child with financial support during a career transition, temporarily adjusting their retirement spending plan.

Advisor Tip: Lifestyle and family goals can reshape spending in retirement—plan for flexibility.

3. The Tax Factor: Managing Complex Wealth

Taxes don’t stop in retirement—they evolve, especially for those with significant wealth:

Case Study: The Executive with Stock Options

An executive nearing retirement had a substantial portfolio of company stock. To manage their tax exposure:

Stock Sales Strategy: They liquidated shares gradually over several years to minimize capital gains taxes.
Roth Conversions: They began converting portions of their 401(k) to a Roth IRA before Required Minimum Distributions (RMDs) began, reducing taxable income later in retirement.

Case Study: The Business Seller

A retiree who sold their business faced significant capital gains taxes. By working with an advisor, they:

Structured the sale as an installment agreement, spreading the tax impact over several years.
Offset taxes by donating a portion of the proceeds to a donor-advised fund supporting their philanthropic goals.

Advisor Tip: Tax strategies tailored to your unique circumstances can potentially reduce liabilities, preserve wealth and fulfill philanthropic goals.

4. Inflation and Longevity: Preparing for the Long Term

Retirement wealth needs to grow with you to meet the challenges of inflation and longevity:

Case Study: The Multigenerational Planner

A couple in their early 60s wanted to ensure their wealth would last for both their lifetime and their children’s:

Inflation-Resistant Investments: They included Treasury Inflation-Protected Securities (TIPS) and dividend-paying equities in their portfolio to offset the rising cost of living.
Longevity Planning: They used a deferred income annuity to provide guaranteed income in their later years.

Case Study: The Strategic Investor

A retired doctor in their late 50s planned for a multi-decade retirement:

They allocated part of their portfolio to growth-oriented investments to maintain purchasing power over time.
They created a dynamic spending plan, allowing them to enjoy early retirement while safeguarding resources for the future.

Advisor Tip: A forward-looking plan helps your wealth support you—and your legacy—across generations.

Conclusion: Your Wealth, Your Vision

Retirement isn’t about winding down—it’s about adapting your wealth to fuel the life you’ve envisioned. Whether your goal is to continue earning, pursue passion projects, or leave a lasting legacy, a strategic approach to cash flow can determine how your wealth will support your ambitions for years to come.

If you would like more information about the terms and strategies discussed in this guide, or if you’re ready to explore how they apply to your specific situation, contact Waverly Advisors. With experience working with individuals, families, and executives managing significant wealth, we specialize in creating tailored strategies with the goal to help you grow, protect, and transfer your assets effectively.

MEET THE AUTHOR

Pam Martin, CFP®, CKA®

Partner, Wealth Advisor

Pam joined Waverly Advisors in January of 2024 after StrategIQ Financial Group was acquired by Waverly Advisors, LLC. She serves as a Partner and Wealth Advisor at Waverly. Pam started her adult life serving as a Medical Specialist in the US Army where she met her husband, Phil… Learn More

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