Retirement Draw-down Strategies
When considering how much to draw-down from your retirement assets, you have to answer the following questions.
- What type of lifestyle do you imagine having during your retirement years?
- What age are you going planning to retire?
- What percentage of your assets do you plan to withdraw from your retirement accounts?
- If you own multiple accounts earmarked for retirement, in what order should you begin your draw-down?
- At what age should I start withdrawing my social security benefits?
- Should you rollover your 401k plan assets into an IRA?
- What effect will inflation play on your retirement plan?
When considering at what age should one start their social security benefits consider that at age 62 you will lose 25 % of your monthly benefits. At age 70 you gain a third larger monthly benefit.
When you begin drawing down start with your taxable accounts first as the tax rate will be less if you held the asset for at least a year. Qualified retirement accounts such as IRA or 401k plans the withdrawal will be considered ordinary account at taxed at your marginal rate. You must begin min. distribution no older than 70 ½.
Roth accounts are tax free when you begin withdrawing as long as you held the account for at least five years. No age requirement as to when you start withdrawals, in other words “no minimum age” distribution requirement.
You should rollover any 401k plan assets in an IRA Rollover account when you leave your employment whether it’s at retirement or to change jobs. Doing so will give you more investment options and makes it easier to access your money.
Remember to take in account what effect inflation will play on your money and how it will increase your monthly expenses over time.
Daniel Iuculano, AAMS CMFC
Financial & Wealth Planner
