In working with my retired or soon-to-be retired clients, perhaps the most frequent question I am asked is “What is the best way to withdraw from my investment and retirement accounts in retirement in order to provide me my desired retirement income?” I believe they ask me this question because many of them have investments in a mix of different accounts with varying tax characteristics such as taxable investment accounts, IRAs, 401k or retirement plan accounts, Roth IRAs, and possibly real estate investments such as rental property. In addition to that, they may also have retirement income coming in from multiple sources and at different times such as Social Security income, pension income, and deferred compensation. If you are interested in increasing what you can spend in retirement and reducing the impact taxes have on your retirement nest egg, it is important to have a multi-year retirement income plan that takes into account the impact taxes will have on both your retirement income sources, and the withdrawals you take from your different investment and retirement accounts.
Tag: Retirement Planning
As a financial advisor, this is a frequently asked question. How much money do I need to save to retire comfortably? In other words, what is my number?
Much has been written about this topic. Schwab recently released a survey of 1,000 401(k) participants across the country indicating that on average, Americans believe they need $1.7 million to retire. That may seem like a reasonable number, but is it? A recent CNBC poll showed that two-thirds of U.S. workers are either very or somewhat confident that they will be able to live comfortably throughout retirement. However, a study by the Employee Benefit Research Institute showed that only 42% of Americans have done any retirement calculations. And on top of that, according to Fidelity, the average 401(k) balance in the U.S. is $297,700 which is a far cry from $1.7 million.
So, where is the disconnect and how can you actually determine what your own “number” is?
Although every person’s situation is completely different, there are really five things to consider when determining how much you need to save for retirement. The impact of underestimating any of these factors could be catastrophic, so this is not the time for optimism. This is the time to be very clear-eyed about setting your goals and expectations. Let’s get started.
Women can face unique challenges when planning for retirement. Let’s take a look at three of them. First, women frequently step out of the workforce in their 20s, 30s, or 40s to care for children — a time when their job might just be kicking into high (or higher) gear. It’s a noble cause, of course. But consider this: A long break from the workforce can result in several financial losses beyond the immediate loss of a salary.
Each year, the Employee Benefit Research Institute (EBRI) conducts its Retirement Confidence Survey to assess both worker and retiree confidence in financial aspects of retirement. In 2018, as in years past, retirees expressed a higher level of confidence than today’s workers (perhaps because “retirement” is less of an abstract concept to those actually living it).
Planning for retirement at any age is always complicated, but when a couple or individual wants to retire at 55, goal attainment can be even more difficult. Careful management and allocation of resources, paired with inventive income-boosting and tax reduction strategies, are the keys to a successful early retirement.
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