Ivan Hernandez on a Strategic Approach to Retirement in U.S. News & World Report

U.S. News & World Report recently interviewed Ivan Hernandez, co-founder and managing director at Omnia Family Wealth, on one of the most critical and often most uncomfortable financial transitions an investor experiences: the move from saving and investing for retirement to spending down what has been saved.

It Doesn’t Happen Over Night
Hernandez begins with a reminder that transitioning from accumulation to distribution should happen gradually. “You need to be able to recalibrate that appreciation aspect with prudent asset allocation and that needs to be done over a multiyear process,” he tells the publication.

This gradual approach helps to avoid sequence-of-returns risks, or making withdrawals when returns are lower. Hernandez recommends that investors have a cash flow and spending policy in place as they make the transition. “It would be horrific if the markets had a meltdown before you were able to institute that cash flow policy or that spending policy on your assets,” he says.

Building Up Cash
Hernandez recommends as investors get closer to retirement, they start to reduce their equity exposure by about 5 percent per year and put it into safer asset classes. Building up cash reserves can also help people avoid tapping into their nest egg at the worst time if the stock market suffers losses. While setting aside a year’s worth of living expenses is ideal, having three to six months of expenses in cash can still help retirees weather bear markets.

Postponing Social Security

Another retirement component in which investors need to be strategic is social security. According to Hernandez, as tempting as it is to claim Social Security as soon as possible, by drawing down early, “you are actually sacrificing anywhere between 25 and 30 percent of those monthly flows.”

If it’s possible, it’s most profitable to wait until either full retirement age, or optimally the age of 70. Depending on the investor’s date of birth, this can mean anywhere from 124 percent to 132 percent of what full retirement age income would be on a monthly basis, Hernandez says.

However, it’s important to remember that each investor’s situation is unique. “Waiting isn’t right for everyone,” Hernandez explains. “Consider your current health and your family’s health history when making that decision. If everyone in your family has not lived much past 75, then claim Social Security as soon as possible.”

To read more about shifting your retirement nest egg to an income stream, see the full U.S. News & World Report article available here.


Important Disclosures: Omnia Family Wealth, LLC (“Omnia”), a multi-family office, is a registered investment advisor with the SEC. This commentary is provided for informational purposes only. No portion of any statement included herein is to be construed as a solicitation to the rendering of personalized investment advice through this communication. Consult with an accountant or attorney regarding individual tax or legal advice.

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