Planning for Retirement Withdrawals: What You Need to Know

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About Rick Dennis

CFF®
Rick Dennis, CFF (Certified Financial Fiduciary®), is the President of Conservative Retirement Solutions, LLC, a Houston-based retirement planning company. Rick started his company in 2004 after he witnessed the negative impact the stock market crash of 2000-2002 had on the retirement accounts of his fellow Baby Boomers. Rick’s company provides financial education for people who want “safe, secure, and guaranteed” retirements and focuses on helping clients learn about financial options they may not know about. During his professional career, Rick has taught numerous classes about current events and how they affect an individual’s retirement. Rick advocates a common-sense approach to financial planning and believes that the necessary money should be kept safe and secure.

Creating an exit strategy should be a top priority when planning for retirement. An exit strategy is simply a plan of action to ensure that you can continue to sustain your lifestyle long after entering the distribution phase of retirement. This is when you start withdrawing and using your hard-earned retirement funds—but it’s important not to withdraw too much money at any time. You must also keep enough money in reserve to cover future living expenses and unexpected costs.

When approaching this phase of retirement, there are several key considerations to keep in mind:

First, decide which investments you’ll need to tap into first. When planning for retirement distributions, some people focus primarily on their pension or Social Security benefits as these sources tend to provide more reliable income. Others may prefer withdrawing funds from other asset classes, such as stocks, bonds, and mutual funds. It’s important to note that withdrawals made from certain types of accounts may be subject to taxation.

Second, calculate the money you’ll need to withdraw each year in retirement. Evaluating your budget and financial goals before deciding on the amount you’ll draw from your investments is essential. Consider incorporating an annuity into your retirement plan as it may provide a steady stream of income protected against inflationary pressures. Annuitized payments offer retirees additional security by helping them plan for future expenses while still being able to preserve principal when needed. Furthermore, annuities also have tax advantages which may help keep more money in your pocket during retirement. All these factors should be considered when determining how much you will withdraw from savings each year.

Third, be aware that taking distributions from your retirement accounts too early could affect you financially. Depending on the type of account, there are penalties for withdrawing funds before you reach a certain age (typically 59 ½). Also, if you have an IRA or other qualified plan, you must begin taking minimum annual distributions (Required Minimum Distribution or RMD) when you turn 72. Understanding the rules and regulations associated with different types of retirement accounts is essential to make sound decisions about when to begin taking withdrawals. You may also want to consider delaying your social security payments until you turn 70. Although the age for full retirement benefits is 66, you can receive more money if you wait until 70. This is because your benefit amount can increase by up to 8 percent each year you delay claiming it after your full retirement age up to 70. Furthermore, delaying payments can provide additional security as you’ll have larger monthly checks to rely on.

Finally, create an emergency fund that you can access in the event of an unexpected expense. This fund should contain enough cash to cover unforeseen costs, such as medical bills or home repairs. It’s important to keep this money separate from your retirement savings so that withdrawals don’t prematurely deplete it for lifestyle spending.

Planning for your retirement distributions is vital to ensuring that your money lasts throughout this critical stage of life. By carefully examining your financial goals, budget, annuity options, and required minimum distributions, you can create an exit strategy tailored specifically to your needs to provide security and peace of mind during retirement.

Talk with a financial professional about which options make sense for your situation and how best to approach the distribution phase of retirement planning.

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About Rick Dennis

Rick Dennis, CFF (Certified Financial Fiduciary®), is the President of Conservative Retirement Solutions, LLC, a Houston-based retirement planning company. Rick started his company in 2004 after he witnessed the negative impact the stock market crash of 2000-2002 had on the retirement accounts of his fellow Baby Boomers. Rick’s company provides financial education for people who want “safe, secure, and guaranteed” retirements and focuses on helping clients learn about financial options they may not know about. During his professional career, Rick has taught numerous classes about current events and how they affect an individual’s retirement. Rick advocates a common-sense approach to financial planning and believes that the necessary money should be kept safe and secure.

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