Turn Savings Into Retirement Income

If you save regularly for retirement, putting a portion of your paycheck or annual earnings into a tax-deferred investment account like a 401k or individual retirement account, at the end of your career you should have a substantial portfolio from which to draw income. But the money may live in many different investments, held within various accounts. It’s not uncommon to have several tax-favored retirement accounts, along with one more taxable investment accounts as well.

You may already be familiar with the important concept of asset allocation. Paying attention to your asset location is just as important. How and when you take distributions from each account will impact your taxes and income planning. Here’s what to think about when tapping your own retirement savings accounts for income.

Plan to Take a Set Percentage Each Year

Retirees who set a disciplined rate of withdrawal can make their savings last longer. Retirement experts generally recommend a distribution rate of about 4 percent per year, adjusted for inflation. You can use a calculator to see what that 4 percent would look like from your accounts. It may be necessary to adjust the withdrawal rate at some point. Opinions vary on annual withdrawal flexibility in the 3 percent to 7 percent range.

Prioritize Certain Accounts

The order in which you start taking money from various accounts will depend mostly on taxes.

Taxable accounts get tapped first. These include brokerage accounts, inherited investment portfolios, and any account for which you pay taxable earnings. Leave the tax-deferred money compounding for as long as possible.

Those tax-deferred IRAs and 401(k)s are the accounts to pull from next. Investors can start taking distributions from these accounts beginning at age 59 1/2.


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Credits: Melissa Phipps
Source: https://www.thebalance.com

About the Author

How can you know what you should do if you don’t know what you can do? Author, radio personality, educator and financial planning pioneer Stephen Kelley shares his secrets to More Now, More Later™ retirement income planning. Most planners regard income planning as a “zero‐sum game,” a “Rob Peter to pay Paul” exercise. In these self‐serving, Wall Street‐dictated scenarios, people must limit the amount of income they receive to ensure they don’t run out of money in retirement. But there is an alternative to this “less now, more later,” or “more now, less later” mentality. Using state‐of‐the‐art income planning techniques, and his own trademarked “Last Things First™” planning process, Stephen Kelley blows the lid off the traditional Wall Street‐serving methods and brings retirement planning home to the individual retiree. In his books you will learn how to: - Unleash as much as 3 times the lifetime income using half the money with Kelley’s trademarked planning process, Last Things First™ - Ensure your Social Security benefits enhance, rather than impede, your plan. - Reduce, or even remove, taxes and fees from your retirement plan. - Maximize market returns while minimizing market risk. - Regain control of your pension so you not only get all the income you can, but so you can also leave it to your heirs. - Take control of the planning process so you can spend freely without worry. - Much, much more.

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