Reaching Retirement: Now What?

| September 15, 2014

Bush-Wealth-Advantage-4Stacy Bush, Valdosta Today Features Contributor:

You’ve worked hard your whole life anticipating the day you could finally retire. Well, that day has arrived! But with it comes the realization that you’ll need to carefully manage your assets so that your retirement savings will last.

Review your portfolio regularly
Traditional wisdom holds that retirees should value the safety of their principal above all else. For this reason, some people shift their investment portfolio to fixed-income investments, such as bonds and money market accounts, as they approach retirement. The problem with this approach is that you’ll effectively lose purchasing power if the return on your investments doesn’t keep up with inflation.

Spend wisely
Don’t assume that you’ll be able to live on the earnings generated by your investment portfolio and retirement accounts for the rest of your life. At some point, you’ll probably have to start drawing on the principal. But you’ll want to be careful not to spend too much too soon. This can be a great temptation, particularly early in retirement.

A good guideline is to make sure your annual withdrawal rate isn’t greater than 4% to 6% of your portfolio. Remember that if you whittle away your principal too quickly, you may not be able to earn enough on the remaining principal to carry you through the later years.

Plan for required distributions
Keep in mind that you must generally begin taking minimum distributions from employer retirement plans and traditional IRAs when you reach age 70½, whether you need them or not. Plan to spend these dollars first in retirement.

If you own a Roth IRA, you aren’t required to take any distributions during your lifetime. Your funds can continue to grow tax deferred, and qualified distributions will be tax free. Because of these unique tax benefits, it generally makes sense to withdraw funds from a Roth IRA last.

Know your Social Security options
You’ll need to decide when to start receiving your Social Security retirement benefits. At normal retirement age (which varies from 66 to 67, depending on the year you were born), you can receive your full Social Security retirement benefit. You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced.
Conversely, if you delay retirement, you can increase your Social Security retirement benefit.

By planning carefully, investing wisely, and spending thoughtfully, you can increase the likelihood that your retirement will be a financially comfortable one.


CONTRIBUTOR

Stacy Bush has practiced independent financial advising in the Valdosta area for 14 years. Growing up on a farm in Donalsonville, Georgia, he is keen to the financial needs of South Georgia and North Florida families. Stacy and his wife, Carla, live in Valdosta with their four children. You can submit questions about this article to askstacybush@lpl.com

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