UBS On-Air: Market Moves Top of the Morning: A “Spending waterfall” to fund your retirement lifestyle
Jun 18, 2025
In this enlightening discussion, Justin Waring, a Senior Total Wealth Strategist at UBS, shares crucial insights for retirees on managing taxes effectively during withdrawals. He introduces the intriguing 'spending waterfall' strategy, emphasizing tax deferral and its implications for future financial health. The conversation explores essential tax strategies like capital gains management and Roth conversions. Waring highlights the benefits of personalized withdrawal plans and the importance of working closely with financial advisors to optimize retirement lifestyles.
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Tax Deferral Limits in Retirement
- Deferring taxes can be beneficial with capital gains, but not always optimal due to progressive marginal tax rates.
- Large required minimum distributions can push retirees into higher tax brackets, increasing tax burdens later.
Implement Spending Waterfall Strategy
- Use a spending waterfall framework to decide withdrawal order to optimize tax efficiency.
- Fill lower tax brackets annually, use Roth conversions, and realistically manage cash flow to avoid high taxes.
Example of Tax Bracket Filling
- Example: Plan a $300,000 annual spend with $200,000 in guaranteed income.
- Use $100,000 taxable distributions and a $94,600 Roth conversion to fill the 24% tax bracket efficiently.