Using ALL Retirement Assets to Maximize Your Outcome

Anthony Watson |

Most Fail to Maximize Their Retirement Situation

One of the leading reasons so many retirees fail to maximize their retirement situation is they do not consider assets other than their retirement portfolio to fund their retirement and manage risk.  Trying to optimize one's spending during retirement while managing the Big Five Retirement RisksTM that every retiree faces is a tall task for any single asset type. Especially when one of the most significant risks, sequence-of-returns risk, is heightened by the very reliance on such market-based assets.

Thinking of your investment portfolio as your only retirement asset to work with when trying to plan for retirement can lead to many suboptimal outcomes.  Why is it then so often the only asset so many consider when planning for retirement?  A primary reason is that financial advisers are predominately paid on a percentage of assets under management, so they seldom consider assets outside those they bill on when planning.  Further, those same advisers lack the incentive to convert a portion of an investment portfolio to another type of asset that may be better suited for a task.  Taking a look beyond just the investment portfolio to take stock of all an individual's assets can allow for a better-constructed retirement plan because certain assets are better suited to different goals.   

Five Broad Categories of Retirement Assets

There are five broad categories of retirement assets one should take stock of and consider when planning for retirement.  While you may end up not wishing to rely on all of these assets, they should all be on the table to make effective tradeoff decisions when optimizing your retirement plan.   Following are the five broad categories to consider:

  1. Human Capital
  2. Real Estate & Home Equity
  3. Insurance
  4. Financial Assets
  5. Social Capital

 We will examine each.

1) Human Capital

If you are healthy, your ability to work and earn is an asset whether you desire to work or not.   If you are not yet retired, you have the option to continue working in your career.  If you are retired, you have the option to earn income through temporary, part-time, or full-time work.  These possibilities can be meaningful when weighing your tradeoff decisions.

2). Real Estate & Home Equity

Real estate and mortgages need to be evaluated as carefully as anything else.  Your home is neither purely an investment nor purely a non-investment.  It may not seem like an investment, but your home may be a source of equity or potential income.  If there is a mortgage on the home, a mortgage payoff analysis would be something to consider.  

There are several ways you could tap the potential value in your home.  You could decide to sell it outright and invest the proceeds.  You could decide to downsize your living arrangements and purchase a smaller home investing the difference.  Another less commonly understood way to leverage a home's value in a retirement plan is through a reverse mortgage.  Despite a bad rap due to a history of bad advice being given by salespeople and improper use of the product, a reverse mortgage can be a handy tool that offers the following attractive features:

  • You can use a reverse mortgage to pay off an existing mortgage.
  • Reverse mortgage income is tax-free (helps with tax management)
  • No credit needed, and no impact on your credit score.
  • When you sell your home, just as with any mortgage, the mortgage gets paid off, and any additional equity belongs to you or your heirs, so you're not leaving any equity on the table.
  • You own and control the property at all times.
  • You can receive proceeds as a lump sum, form of life-long monthly payments, as a line of credit, or in any combination.

 Because of the features and flexibility of the tool, it can be used successfully to help achieve many different strategies, such as:

  • To allow you to defer your social security start date until you reach full retirement age (FRA) to maximize your Social Security income.
  • To manage taxes through using its tax-free income to help manage your tax brackets.
  • To manage sequence-of-returns risk by providing a source of income to pull from in down markets.
  • To serve as a reserve asset to fund contingent or unplanned expenses.

Reverse mortgages are not necessarily right for every person in every situation, but they can help accomplish specific goals.  The point is your real estate, and mortgage decisions should be viewed objectively as part of your retirement income plan.

3). Insurance

Insurance is a financial contract with an insurance company that will pay out a benefit contingent upon an event in exchange for a premium paid.  Insurance can be a great tool in retirement planning.  Especially when it comes to needing to cover large contingent expenses that may or may not happen.  Health insurance, long-term care insurance, and life insurance are all common types of insurance in retirement planning.  Insurance is costly, but there are times it may be necessary if you are unable to "self-insure." To "self-insure" is to have the means to meet a large unplanned expense should it occur without drastically affecting your standard of living or goals.  Insurance is quite an effective vehicle for covering contingent expenses because insurance companies can pool risks over many individuals, giving them the ability to project more accurate and consistent results.  This allows insurance companies to insure against risks at a cheaper rate than an individual who chooses to self-insure.    

Insurance companies also sell annuities.  An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or in the future.   Many aspects of an annuity can be tailored to the specific needs of the buyer.  Annuities are not inexpensive, but they can buy peace of mind by guaranteeing a stream of income for life.

Insurance's key role is to manage risk, not to be an investment or savings vehicle.  Many who sell insurance will try to present them as investment or savings vehicles.  Insurance doesn't make for good investment or savings vehicles because their primary objective is to manage risk. You have to pay for that risk management feature, which effectively reduces the return. Many retirement planning objectives can be accomplished without the use of annuities and insurance, but like any tool, they should be considered and used when appropriate.

4). Financial Assets

These are the assets most commonly thought of when referring to retirement assets.   Financial assets may include cash in checking/savings, investments in brokerage accounts, and/or investments in retirement accounts (401ks/403bs, IRAs, Roth IRAs).  When taking stock of your financial assets, it's important to note the account type because various account types have different features and benefits.

401(k)/403(b) Plans

401k plans, and 403(b) plans for you non-profit employees, have some interesting age-related rules that differ from those that apply to IRAs.  You should know these rules before deciding to move money out of a 401k plan into an IRA.  Many 401k plans have a rule that allows you to withdraw funds penalty-free at 55 (instead of 59.5) if you:

  • Terminate employment no earlier than the year in which you turn age 55 but before age 59.5.
  • Leave your funds in the 401k plan to access them penalty-free.

This may or may not matter for you, given your situation, but you don't want to start rolling over accounts until you have a full retirement plan strategy in place.


Most tax-deferred retirement accounts that belong to the same individual can be combined into one IRA account for that individual.  Consolidating accounts near retirement makes a lot of sense, assuming you're not between the ages of 55 and 59.5 with a 401k at an existing employer.  Rolling over can often make sense for 1). ease of administration, 2). a wider array of investment choices, 3). better beneficiary options, and 4). easier to handle required minimum distributions (RMDs) when they start the year you turn 72.

Roth IRAs

A Roth IRA is an individual retirement account funded with after-tax dollars, unlike 401(k), 403(b), and IRAs funded with dollars before income tax is taken.  In exchange, Roth IRA offers tax-free growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as you've owned your account for five years and you are age 59½ or older, you can withdraw your money when you want to, and you won't owe any federal taxes.  Roth IRAs can be helpful when trying to manage income tax-brackets in retirement.

Coordinated Withdrawal

Because different financial assets have different features, there should be some strategy behind the types of investment each account holds and a strategy around how and when to withdraw from each account to maintain optimal investment asset location and tax efficiency.  Before retirement, you should create a withdrawal strategy.  A withdrawal strategy helps you strategically decide which accounts to withdrawal from and how to coordinate that with your other sources of income in a way that improves or optimizes your outcome.   



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5). Social Capital

Social capital can be understood as networks of social or government relations characterized by trust and reciprocity norms.  Assets that fall under this category include Social Security, Medicare, and family/community help.    

Social Security

One of the most important decisions you'll have to make as you approach retirement is when to start taking Social Security Benefits. Social Security will be one of your most important assets.   What makes Social Security so important is that it is a government annuity that you've been paying for since the day you started working that will pay you until the day you (and your spouse) pass.  You cannot outlive your Social Security asset like you potentially can your financial assets.   A smart Social Security claiming decision that is integrated with the rest of your retirement plan can help provide a solid floor of guaranteed income for life.

You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.  Your full retirement age is based on your year of birth.

Social Security claiming is a complex subject.  Each year many people leave tens of thousands of dollars on the table by claiming too soon or not coordinating benefit strategies with their spouse.  Your claiming strategy matters a great deal, and there should be a strategy behind it.  It is important to analyze before you make this critical and often irrevocable decision.  


Medicare is the national health insurance program in the United States that provides health insurance for Americans aged 65 and older.  Generally, if an individual already receives Social Security payments, at age 65, the individual becomes automatically enrolled in Medicare Part A (Hospital Insurance) and Medicare Part B (Medical Insurance). Suppose the individual chooses not to enroll in Part B (typically because the individual is still working and receiving employer insurance). In that case, the individual must proactively opt out of it when receiving the automatic enrollment package. Delay in enrollment in Part B carries no penalty if the individual has other insurance (e.g., the employment situation noted above) but may be penalized under other circumstances. An individual who does not receive Social Security benefits upon turning 65 must proactively join Medicare if they want it. Penalties may apply if the individual chooses not to enroll at age 65 and does not have other insurance.

Medicare is divided into four parts:

  1. Part A -- covers hospital (inpatient, formally admitted only), skilled nursing (only after being formally admitted to a hospital for three days and not for custodial care), and hospice services.
  2. Part B -- covers outpatient services, including some providers' services while inpatient at a hospital, outpatient hospital charges, most provider office visits even if the office is "in a hospital," and most professionally administered prescription drugs.
  3. Part C -- is an alternative called Managed Medicare or Medicare Advantage, which allows patients to choose health plans with at least the same service coverage as Parts A and B (and most often more), often the benefits of Part D, and always an annual out-of-pocket spend limit which A and B lack. A beneficiary must enroll in Parts A and B first before signing up for Part C.
  4. Part D -- covers mostly self-administered prescription drugs.

No part of Medicare pays for all a beneficiary's covered medical costs, and many costs and services are not covered at all. The program contains premiums, deductibles, and coinsurance, which the covered individual must pay out-of-pocket. Many individuals choose to purchase a separate Medigap plan to help fill in the financial holes in Medicare Part A and B in addition to public Part D. These Medigap insurance policies are standardized but are sold and administered by private companies.


This category may seem odd, but it may be that a family member would like to be a part of your caretaking someday, whether physically or financially.  Maybe you live in a community with a meals-on-wheels program that can deliver meals when you cannot cook on your own.  Maybe it is a member of your church that can drive you to the grocery store every week for groceries.  This category may not be something that you want to plan to rely on, but taking stock nevertheless helps when it comes time to determine the amount of risk you are willing to take on in your retirement plan and sustainable spending strategy.

Maximize Your Retirement Outcomes

While identifying and considering all of your retirement assets is but one step of many in a Proper Retirement Planning Process, it is an important step. Not all assets are created equal, and some assets are better suited than others at tackling particular objectives within your retirement plan.  Effectively accounting for all assets available to you and optimally using your retirement assets is key to maximizing your retirement outcomes.  This is one goal on which I think all retirees would agree.   

If you need help identifying and optimally using your retirement assets, we're here to help.  If you have any questions, please feel free to reach out.