Saving for retirement can be complicated. However, if you think the tough decisions are over once you’ve collected your final paycheck, you’re wrong. Tapping into those retirement savings takes just as much careful planning. Withdraw too much too soon and your nest egg will shrink too quickly. Use too little and you may be unnecessarily forgoing a comfortable lifestyle. Then there are the tax implications of every withdrawal decision… you get the picture.
Fortunately, we’re here to help. Consider the following money-saving withdrawal strategies. And please don’t hesitate to contact us for assistance with any aspect of retirement planning.
Strategy 1: Curbing Taxable Income
Not only does keeping taxable income low mean you’ll pay less of it in taxes, but it can also lead to savings in other areas—like healthcare. If you buy health insurance through an exchange, a lower income will qualify you for a larger subsidy. That can mean saving a bundle on your premiums. Talk to your financial advisor about the income limits and available subsidies in your state.
Strategy 2: Delaying Benefits
Even if you choose to retire early, delaying the collection of Social Security benefits until you’ve reached official “full retirement” age can be a very smart strategy—especially if you have plenty of other retirement savings. Sure, depending on your actual age, you may have to pay income taxes on withdrawals from tax-deferred accounts. However, your Social Security benefits will increase approximately 8 percent for every year you delay your claim. Talk to your financial advisor about the best time to begin collecting on Social Security.
Strategy 3: Plan for Withdrawals in Advance
Maybe you want to keep working until you’re 75. That doesn’t matter to your IRA and 401(k) accounts. As soon as you turn 70.5, you have to begin taking mandatory withdrawals from these tax deferred accounts and paying associated income taxes. If your tax bracket is likely to be higher at that time than it is when you’re in your 60s, you might be better off making larger withdrawals earlier. Your financial advisor can help you weigh the costs and benefits.
Strategy 4: Don’t do Anything without a Financial Advisor
A knowledgeable financial advisor is essential no matter what your strategy. He or she can help you move money around to reduce your future taxes on savings and earnings as well as plan your withdrawals to enable you to retain subsidies, keep your Medicare premiums low and live the retirement lifestyle you desire.