Steadfast Wealth Planning Podcast

Landing the Retirement Plane: How to Avoid Common Withdrawal Mistakes

• Cody Stansell • Episode 4

Share episode

What Are The Biggest Mistakes People Make When Withdrawing From Retirement Accounts?

How you withdraw from your retirement accounts is just as crucial as how much you save—possibly even more important. This fundamental truth sits at the heart of our latest conversation with Cody Stansell, who reveals why many retirees struggle despite substantial savings.

Drawing from years of experience guiding clients through retirement transitions, Cody explains that moving from accumulation to distribution represents a profound shift that many fail to navigate properly. "It's like taking off with a plane," he explains. "It's easier to take off and coast in the air than it is to actually land the plane." This aviation metaphor perfectly captures why even diligent savers can find themselves in trouble without proper withdrawal strategies.

The episode delves into the two most devastating retirement withdrawal mistakes. First, failing to create a comprehensive plan that accounts for market volatility, unexpected expenses, and inflation—which has driven the cost of living up 22% since 2021 alone. Second, maintaining inappropriate investment allocations that either expose retirees to excessive market risk or fail to generate the growth needed to sustain purchasing power over decades.

Cody's innovative three-bucket approach provides a practical framework anyone can implement. By strategically allocating funds based on when they'll be needed—immediate expenses, mid-term needs, and long-term growth—retirees can both sleep soundly during market turbulence and ensure their money lasts as long as they do. He also addresses the psychological aspects of retirement spending, noting how natural savers and spenders require different guidance to achieve financial balance.

Whether you're approaching retirement or already there, this episode delivers actionable insights to help ensure your nest egg provides the retirement lifestyle you've worked so hard to achieve. Ready to implement these strategies? Visit Steadfastwealthplanning.com for a complimentary consultation or call 469-606-2040 to speak with a qualified advisor who can help tailor these principles to your unique situation.

To learn more about Steadfast Wealth Planning visit:
https://www.SteadfastWealthPlanning.com
Steadfast Wealth Planning
5550 Granite Pkwy, STE 270
Plano, TX 75024
469-606-2040

Speaker 1:

Welcome to the Steadfast Wealth Planning Podcast, where faith and financial wisdom come together. Hosted by Cody Stansel, owner and senior wealth advisor, we provide comprehensive Christian-based financial planning to help families, individuals and business owners build a life they're proud to live. From investment management and tax planning to preparing for retirement, we're here to guide you with clarity, integrity and purpose. Let's get started.

Speaker 3:

It's not just about how much you save for retirement, it's about how you take it out. Let's break down the most common withdrawal mistakes and how to avoid them. Welcome back everyone. I'm Sofia Yvette, co-host slash producer. Back in the studio with Cody Stansel, senior wealth advisor for Steadfast Wealth Planning. Cody, how's it going today?

Speaker 2:

Sofia doing well. How are you doing?

Speaker 3:

I'm also doing well, cody, and that is great to hear. Can you inform our listeners what are the biggest mistakes people make when withdrawing from retirement accounts?

Speaker 2:

Yeah, good question. This is a big one for your overall financial plan. Kind of like you said in the intro, you could save millions of dollars. You could have $10 million saved. But if you're spending too much quote unquote in retirement, it's still going to run out, right? So it's not just accumulating those dollars, it's how you spend it in retirement too.

Speaker 2:

A lot of folks can accumulate money between 30 and 60, right, for three decades adding to your 401k. Being aggressive with your investments, you're not too worried about the stock market fluctuations because you know you have years, or even decades, until you retire. So it's a different animal. It's a different ballgame when someone is ready to retire, compared to when they're in their accumulation years. Like I said, between 30 and 60,. Let's say, if you don't know if you're going to run out, that's very nerve wracking for a lot of folks, right? So, and usually what I see is natural spenders. You know people that like to spend money in their working career. They're kind of natural spenders in retirement too, right? So our job is a lot of it's, you know, reining them in in retirement. You know I use it this way, ms Jones. Make sure that 85 year old Ms Jones still has money, you know, compared to current day 65 year old Ms Jones. But then there's some other folks that are natural savers during their working career and so naturally we see them be natural savers too. They don't spend too much money, and for my job that's actually fantastic, because that's the fun part, right? I get to encourage people like no, no, no, you're okay, you can spend some more money in retirement, right? Because they're just so scared to spend any money. So it's not about accumulating zeros at the end of your financial plan, right. There's no reward for having the most amount of money in your IRA or 401k, right? It's about living the life that you want to live in retirement, passing on a legacy, being a fulfilled retirement for your kids, grandkids, and so balancing spending enough and not too much is a big deal.

Speaker 2:

But to answer your question, the two biggest mistakes we see a lot of people make are one is just not having a plan, right. A lot of folks just go into retirement. Like I was saying, accumulating assets in your working career is a lot easier than OK. You know, it's kind of like taking taking off with a plane. It's easier to take off and coast in the air than it is to actually land the plane, take off and coast in the air than it is to actually land the plane, right? So what if your investment balance goes down 10 to 20% because of the market? What if retirement costs you more than you thought it would? Inflation has been a big one the last few years, right? A recent study came out this cost of living is about 22% more than it was in 2021. So 22%, that's a big deal, right? In just that four-year time period. So what if you spend more than you originally thought you would Not?

Speaker 2:

Having a plan is a big one. We have software that runs through a thousand different scenarios and it's real thousand scenarios I'm not being hyperbolic Of different market events, inflation what if tax law is different? All the what ifs that you and I can't control. And it runs through all of your income from social security, any pension, any rental income, if you have part-time employment during your first few years of retirement. So all of that income that you have coming in compared to all of your expenses, right, how much do you want to spend in retirement? And the software isn't emotional, it's just data. So if the data looks good and hey, we have a good plan, you can spend this much. You know, no matter what market event we have, then great. If the data doesn't look good and the plan doesn't look good, then it's back to the drawing board. What can we do? Do we need to save more? Do we need to spend less? You know, make some changes to the financial plan.

Speaker 2:

So once again, the first big one is not even having a plan. A lot of people just don't know. Another big mistake we see people make is with their investments in retirement. I see way too many folks invested too aggressively, especially in their first few years of retirement, because they don't know any different. They've had stock market mutual funds for decades in their 401k and that's the only thing they know.

Speaker 2:

And the first stock market pullback, you see, when you're retired, it scares a lot of folks, right. So I just had a lady in here. She retired last year. As of this taping, it's May of 2025. The market is down to start the year. This is her first experience that she is retired and the market has pulled back. In previous years she hasn't really cared as much because once again she's in the accumulation phase.

Speaker 2:

But it hits you differently emotionally when the market pulls back and you're not adding money to your 401k anymore. We're sending you money from your portfolio, so emotionally, it affects a lot of folks different. Some folks can panic and sell everything when the market is low because they don't want to lose their nest egg, and I understand, rightfully so. But this in general is investment suicide, right, that's what we call it selling low, and then when the stock market comes back up and everything looks good, okay, let me buy back in. Well, you're just buying in high and then the market pulls back again. So you get scared and sell low again and it's a vicious cycle, right? And so we have a bucketing approach.

Speaker 2:

So think of three different bucket approach. The first bucket we want you to have about 24 to 36 months of income in a very, very conservative investments, right? So if you want to spend $5,000 a month, you need $5,000 a month in your portfolio. That math we went about. I have $120,000 to $180,000 of very conservative money, right? Doesn't really fluctuate with the market, you're not worried about it. That is the money that we're sending you in retirement and that way you can sleep easy at night that, no matter what happens in the market, you're still going to get a paycheck.

Speaker 2:

The second bucket is another 24 to 36 months of income, but it's invested a little bit more aggressively. It's modestly conservative, modestly aggressive, right, a little bit more aggressive, but still not near as volatile as the stock market. This we want to keep up with inflation. We want to make sure that money is still there as well. Then the remaining balance of your account we want for growth, right, and this is not for you today, this is for you in 5, 10, 20 years from now. It needs to keep up with inflation.

Speaker 2:

When you hire me as your advisor, I have as just as much duty as current day client as I do 20 years from now, current client. So we can't be uber conservative with all our investments, not keep up with inflation, not keep up with your withdrawals and retirement, and you look up 10, 20 years from now and you don't have enough for your latter years, right, we can't do that. This portion of your money will go up, it will go down, it's gonna do what it's going to do, but obviously over time, over those long periods of time, it's going to grow with that compound interest effect. So it's kind of like the value of your house If you have no plan on selling it in the next decade. You care much less what the value is month to month, year to year, right, because you have no plan on selling it today. You don't really care. It's going to do what it's going to do.

Speaker 2:

That same analogy with the growth portion of your investments. So biggest mistakes we see people have is they don't really have their investment money thought out like that. They just have it in one big bucket and some of it's conservative or some of it's aggressive, but they don't really understand why and it just feels like one big bucket that's going up and down with the market. We don't like that type of style. We like having your different investments spread out for that particular reason, and one bucket is for today, one bucket's for a few years from now and another bucket is for a decade from now. So those are the two biggest mistakes we see just not having a plan and then your investment allocation not being really what you think it is, especially your first few years of retirement wow.

Speaker 3:

Well, thank you so much, cody, for those helpful insights, and we'll catch you on the next episode. Have a fantastic rest of your day absolutely you too, soph.

Speaker 2:

God bless you.

Speaker 1:

Thanks for joining us on the Steadfast Wealth Planning Podcast. Ready to take the next step in your financial journey, visit steadfastwealthplanningcom for a complimentary consultation or call 469-606-2040. Smart planning, christian values, a Life Well Lived. We'll see you next time.