Planning during retirement can be just as important as planning for retirement. Payments from pension plans, social security checks, withdrawals from 401(k)s, income from a part-time job — these become your paychecks. Planning during retirement helps ensure that you remain financially independent.
Two of the biggest financial decisions you’re likely to face during retirement are when to start tapping retirement savings and how much to take out. Many people take out too much too soon. It’s tempting to look at your 401(k) balance and to start dreaming about those exotic vacations you’ve always wanted to take or that fancy new car you’ve always wanted to drive. Slow down. You may be retired for the next thirty years.
That’s why it’s a good idea to set up a retirement budget. Based on your life expectancy, consider how much you’ll need to cover expenses. Will you travel? Will you help a child or grandchild buy a house or pay for college expenses? Also, determine how much you’ve accumulated and how much that money will grow. A retirement budget can help ensure that you have enough money for the necessities — and for the luxuries.
When should you start taking money out of retirement savings? A good general rule is to withdraw retirement savings only when other sources of income aren’t enough. If you can wait until age 70½ before taking money out of 401(k) plans and other tax-sheltered accounts, do so. The longer your money stays in such accounts, the longer you’ll enjoy tax-deferred growth.
Whether you’re about to retire or have been retired for a while, we can help you consider the implications, including the tax impact, of a withdrawal plan. Give us a call.
Tags: retirement planning
Written by: Doug Rodrigues