Retirement Planning

Planning for Retirement Income

* Any discussion of taxes is for general information purposes only, does not purport to be complete or cover every situation, and should not be construed as legal, tax, or accounting advice. Estate Planning services are provided working in conjunction with your Estate Planning Attorney, Tax Attorney and/or CPA. Consult them for specific advice on legal and tax matters.

How to Learn More

Rolling over your retirement account into an IRA and planning your retirement income are critical steps in ensuring a comfortable and financially secure retirement. If you’re ready to take control of your retirement savings and create a reliable income plan, contact our financial planners today. We’ll guide you through the rollover process, help you explore income options, and design a comprehensive plan that fits your retirement vision.

Withdrawal Strategies

Your retirement income plan will depend on how you withdraw funds from your IRA and other retirement accounts. There are several strategies to consider:

The 4% Rule: A common guideline is to withdraw 4% of your retirement savings each year to ensure that your funds last for 30 years. This rule provides a starting point, but you may need to adjust based on your needs, life expectancy, and investment returns.
RMDs (Required Minimum Distributions): Once you reach age 73, the IRS requires you to begin taking minimum distributions from traditional IRAs and 401(k)s. These RMDs are based on your account balance and life expectancy, and failure to take them results in a hefty penalty. Planning for RMDs is critical to managing your retirement income.
Bucket Strategy: This strategy divides your retirement savings into three “buckets” – one for short-term needs (1-5 years), one for medium-term needs (5-10 years), and one for long-term growth (10+ years). By drawing from the short-term bucket first and allowing the long-term investments to grow, you can better manage market risk and ensure you have a steady income stream.

Social Security Benefits

Social Security will likely play a role in your retirement income. Deciding when to start taking benefits is an important decision, as it affects the size of your monthly payments. You can begin taking Social Security as early as age 62, but your benefits will be permanently reduced. If you delay benefits until age 70, your monthly payments will be higher. The best strategy for you depends on your health, financial needs, and overall retirement plan.

Pension Income

If you are eligible for a pension from a former employer, this can be an additional source of income in retirement. Pensions provide a fixed monthly payment for life, offering a reliable income stream. When planning your retirement income, consider whether to take a lump sum or opt for monthly payments, depending on your financial goals.

Annuities for Guaranteed Income

An annuity can convert a portion of your retirement savings into a guaranteed income stream for life or a set number of years. This ensures you won’t outlive your money. Fixed annuities, in particular, offer predictable payments, making them a popular choice for retirees seeking stability. Annuities can be purchased with funds from your IRA, creating a steady stream of income that complements Social Security and other retirement savings.

Managing Taxes in Retirement

Taxes can significantly impact your retirement income, especially when withdrawing from traditional IRAs, 401(k)s, or 403(b)s, where distributions are taxed as ordinary income. Roth IRAs, however, offer tax-free withdrawals, making them a valuable tool for reducing your tax burden in retirement.

Planning ahead by strategically withdrawing from taxable, tax-deferred, and tax-free accounts can help minimize taxes and maximize your income. For example, you may choose to withdraw from taxable accounts first, allowing your tax-deferred accounts to continue growing.

Benefits of Rolling Over into an IRA

How Rolling Over Into an IRA and Planning Your Retirement Income Benefits You

Greater Control Over Investments: Rolling your retirement savings into an IRA provides more control over how your money is invested. You can diversify your portfolio and choose investments that align with your risk tolerance and long-term goals.
Tax Efficiency: A properly executed rollover allows your savings to continue growing tax-deferred, while strategic income planning can help minimize taxes on your withdrawals. This combination ensures that more of your money is working for you over the long term.
Flexible Income Options: By consolidating your retirement accounts into an IRA, you have more flexibility when it comes to withdrawing funds. You can choose the timing and size of your withdrawals to match your income needs and retirement goals.
Estate Planning Benefits: IRAs offer more flexibility in estate planning compared to 401(k)s. You can designate beneficiaries and take advantage of options like stretch IRAs, which allow your heirs to extend the tax-deferred growth of the account.

Who Should Consider a Rollover and Retirement Income Planning?

Individuals Leaving a Job: If you’re changing jobs or retiring, rolling over your old 401(k) or 403(b) into an IRA can help simplify your retirement savings and give you greater control over your investments.
Retirees and Pre-Retirees: Those nearing retirement should consider rolling over their workplace retirement accounts into an IRA to gain access to more investment options and flexible withdrawal strategies. This is particularly important for those who want to convert part of their savings into a guaranteed income stream through an annuity.
Conservative Investors: If you’re looking for a secure, tax-efficient way to manage your retirement savings, an IRA rollover offers the protection of tax-deferred growth and the opportunity to carefully plan your income and taxes in retirement.

We want our clients to know we’re here to help them no matter what. If you want to know more about how we can help you, schedule an introductory call.