Creating an effective distribution strategy for when one retires is often overlooked, but it's one of the most important factors in having a stress-free retirement.
An effective distribution strategy plan addresses the timing of social security benefits, retiree-specific tax planning, making Medicare and other health insurance decisions, health issues, tapping into primary home equity through reverse mortgages, and housing lifestyle choices. The latter strategy also addresses whether to “age in place” or utilize a Continuing Care Retirement Community, which handles cognitive decline and the problems that come with it, and even the emotional issues associated with death, grieving, and losing loved ones.
By the age of retirement, different accounts are accumulated, and each account has its own tax effects. Managing these taxes and being informed on the tax effects can reduce total amount paid in taxes. For a savings or brokerage account, capital gains taxes must be considered when taking money out. 401Ks and IRAs withdrawals are subject to income taxes at ordinary tax brackets. Roth 401Ks and Roth IRAs are not taxed on the withdrawals.
During retirement, you no longer receive earned income and the safety net of getting a paycheck every couple of weeks. Having a strategy in place that addresses your income needs in order to sustain your lifestyle is essential to a comfortable retirement. There are a number of different strategies for withdrawing money during retirement, but two main ones are withdrawing from one account at a time and/or withdrawing proportionally across accounts. An advisor with the CRPC® designation and other designations that focus on retirement distribution strategies can help implement and explain these effective tax efficient strategies.
RZ Wealth’s advisor, Pete Hackenbrack recently completed his Chartered Retirement Planning CounselorSM designation. This designation focuses on retirement planning and goes in-depth on what an individual’s financial needs are both before and after retirement. Our other advisors Irv Rosenzweig and Samuel Varano also have the certifications you want and need in order to make these critical decisions, such as the CFP® designation. It is crucial to work with a financial professional who’s earned designations in overall financial planning to help you evaluate your financial status and design the optimal retirement plan for your lifestyle.
This is the time for creating a road map for retirement and feel comfortable going into retirement knowing you planned accordingly. If you plan properly, you can have the financial confidence to enjoy retirement and the peace of mind that you are on the right track.