Let’s face it, most financial planners and advisers focus a lot on accumulating money for retirement. News headlines, blogs, tv shows, and the financial press in general are always telling you what you should be doing to save for retirement. Whether it’s how much to save, determining your “number,” or what type of investments to make, it’s usually focused on saving for retirement and accumulating a certain sum. That’s all great stuff, but suppose you get that message, save diligently and reach your target. Now what?
Ok, you have made it to retirement, have saved a considerable sum, and are ready to tap the myriad investments you have accumulated over your life. Which do you tap first? Should you take money from your taxable accounts first or should you delay those withdrawals and take money from your tax-deferred accounts first? Oh, and don’t forget, some of you may have a third, tax-free option. It starts to get a little challenging if you have all three types of money to choose from in retirement.
Is there a general rule of thumb to guide you as to what to tap first? Could the general rule be different for people in different situations? The answer is yes, and yes. There is a general rule of thumb which posits that investors should first draw from their taxable accounts, then their tax-deferred accounts, and lastly from their tax-free accounts. Of course, this is a general rule of thumb and every situation is different. The best approach is to get help and not guess. Guessing and winging it can end up being very costly. So, consult with an adviser to help you figure out the advantages of using the rule of thumb approach or executing a more customized drawdown strategy based on your personal situation. If you are not sure why this general rule applies or if it will help you, contact me and we can discuss your personal situation.
Working with a Certified Financial Planner™ you can target which accounts to tap first, and understand why. Your situation may not fit the rule of thumb approach, or it may be the perfect option for you. However, unless you get some help, run the numbers and understand why you are doing what you are doing, you won’t know for sure.
As an independent Certified Financial Planner™, I can help you with a drawdown strategy tailored to your goal, timeline and resources. Contact me and let’s get started! #talktometuesday #drawdown #Hireaplanner #RothIRA #IRA #401k #retirement #spend