Retirement Withdrawals in Optimal Order

Retirement Withdrawals in Optimal Order
 

In this issue:

• Latest in Retirement Savings & Personal Finance: Amazon Prime Day Record Sales, Inflation Rise Again? Underestimating Hobby and Pastime Costs
• Retirement Withdrawals in Optimal Order
• Tools & Tips: Retirement Withdrawal Optimal Calculator
• Market Overview

Latest in Retirement Savings & Personal Finance: Amazon Prime Day Record Sales, Inflation Rise Again? Underestimating Hobby and Pastime Costs

Amazon Prime Day Record Sales

Even with inflation creeping up and tariffs in the background, Americans are still spending. Amazon’s Prime Day (July 8 to 11) just hit record numbers, with billions saved across millions of deals. Morento air purifiers were 80 percent off. Apple AirPods Pro 2 were down 40 percent. Electronics, home goods, beauty items. People weren’t pulling back, just being more intentional. Buying what they need now before prices rise later. If anything, it looked like a smart adjustment to inflation, not a retreat from it.

Small sellers reported record sales too, helped by the longer four-day format and smarter AI deal prompts. A few skeptics online claimed demand was softer, but official data and third-party reviews said otherwise. What stood out was the shift toward quality. People weren’t panic buying junk. They were choosing value and preparing, quietly, for whatever comes next.

In a word, it’s a good news that Americans are still spending healthily. 

Inflation Rise Again? 

Inflation seems to be creeping back into the headlines again. New tariffs from President Trump, now at 15 to 20 percent on most countries and 35 percent on Canadian imports, are starting to stir the pot. Economists expect core PCE to rise from 2.7 percent in May to around 3.4 percent by Q3, maybe 4.3 percent by the end of the year. The reason behind this is simple: once inventories run through, companies may start passing the higher costs along. In fact, some retailers (like Nike, Lululemon) are already hinting at 8 to 15 percent increases, especially on things like clothing. CPI for May still came in low at 2.4 percent, but June ticked up. It’s not a full-blown surge yet, but something is moving.

That said, not everything is climbing. Vehicle and energy prices actually dropped 2.6 percent from April to May. So it’s mixed. Still, public mood isn’t mixed at all. Gallup says 90 percent of Americans are worried about inflation. Fed kept rates steady, probably watching the tariffs closely. Yet consumer spending doesn’t seem rattled much. Amazon Prime Day just broke records. Even so, with expectations running as high as 7.3 percent annual price increases, and some early whispers of stagflation coming back into the conversation, retirees and cautious investors are starting to think a little harder about how to protect themselves.

Regardless, retirees are the biggest losers so far as the recent bouts of inflation have made more things expensive: remember even if inflation stays low, whatever price levels reached will stay!

Underestimating Hobby and Pastime Costs

A recent Lincoln Financial survey found that 39 percent of retirees underestimate how much their hobbies and pastimes really cost. It sounds small, but the effect can be big. These aren’t luxury splurges either—just regular things like golf, travel, gardening. Stuff that makes retirement feel like retirement. The problem is, people tend to assume these will be occasional or cheap. But golf club fees alone can run from $1,000 to $5,000 a year. A nice camera setup can easily hit that range too. And with tariffs now adding 15 to 20 percent on most imports, and even higher on Canadian goods, inflation pressure is building. Core inflation could reach 3.4 percent by Q3. It adds up fast.

What’s tricky is that most planning focuses on healthcare or housing, which makes sense. Fidelity says the average couple will need $315,000 for healthcare alone. But that leaves hobbies underfunded. And these aren’t just extras. A lot of studies show that meaningful activities—things you actually enjoy—matter for both mental and physical health. Yet if a retiree spends $2,000 a year on hobbies for 20 years, that’s $40,000, not counting inflation. Many don’t plan for that. The result? Either savings drain faster than expected, or people cut back and lose the things that give their days structure and joy. Especially now, when service prices like fitness classes are also rising. So while tools like budgeting apps, senior discounts, or smart timing around big sale days can help, it still comes back to making space for this early on. Not just in the plan, but in the mindset.

Some actionable strategies:

• Budget for Hobbies Explicitly: Financial advisors recommend allocating 10–20% of retirement income to discretionary spending, including hobbies.
• Leverage Discounts: Retirees can mitigate costs by capitalizing on sales like Amazon Prime Day 2025, which offered up to 80% off on hobby-related items (e.g., fitness trackers or craft supplies).
• Dynamic Planning: As spending peaks in the 50s and declines after 80, retirees should adopt dynamic budgeting, allocating more for active years (e.g., $3,000/year for travel in the 60s) and less later ($1,000/year for low-cost hobbies like reading). Consulting a fiduciary advisor if needed. 

Retirement Withdrawals in Optimal Order

In Best Strategy to Withdraw Funds in Retirement, we outline an ‘optimal’ way to withdraw funds from your retirement savings. Here is the gist:

1. Understand Your Income Foundation

Before you tap your investments, look at what income is already coming in. The guaranteed stuff. These are your foundation before you ever touch a stock or bond.

Here’s what usually counts as fixed income:

• Social Security
• Pensions
• Annuities
• Rental or business income

Important thing is knowing when these begin. Retiring at 62 but delaying Social Security until 70? That’s eight years you’re covering out of pocket.

Understand Your Buckets

Most people’s retirement assets live in three types of accounts. Each one comes with its own tax rules. And how you pull from them matters.

Optimal Order

General rule of thumb: start with taxable, move to tax-deferred, save Roth for last. Won’t be perfect for everyone, but it works surprisingly well in most cases.

1. Start with Taxable Accounts
   Early in retirement (especially before Social Security or pensions begin) you might be in a low tax bracket. That’s the time to sell appreciated assets. Long-term gains could be taxed at 0 percent if income’s low enough. Some couples can realize over $100,000 in gains and still owe nothing to the IRS.
2. Then Move to Tax-Deferred Accounts
   Once taxable is drawn down (or once your income starts rising) you shift to traditional IRAs or 401(k)s. These are taxed as ordinary income, so it’s important to be thoughtful. Withdraw too much too fast, and you could push yourself into a higher bracket.
3. Save Roth for Last
   Roth is the golden bucket. Withdrawals are tax-free, and the longer you let it grow, the more powerful it becomes. It’s tempting to touch it early, but the real benefit shows up much later (either for your later retirement years or your heirs). No required minimum distributions. No tax surprises.

The article even shows an example that illustrates the order can make a $1 million dollar difference!

Tools & Tips: Retirement Withdrawal Optimal Calculator

The Retirement Withdrawal Optimal Calculator helps you to decide what to withdraw first and how much.You first feed the calculator the following inputs: 

Here in addition to the ‘fixed income sources’ and their starting ages, you also enter your tax bracket information. You further enter your retirement savings in the three categories: taxable, tax-deferred and tax-free (Roth). 

Pressing Calculate will give you suggestions (and other information): 

Check it out! This will prove to be a valuable calculator for retirees. 

Market Overview

Stocks rose again. Investors are conditioned to look for upcoming lower interest rates, still healthy corporate earnings and maybe subdue inflation. At any rate, US stocks made all time high again last week. 

The following table shows the major asset price returns and their trend scores, as of last Friday: 

More detailed returns and trend scores can be found on MyPlanIQ.com Market Overview.