You’ve spent years building your savings and preparing for retirement.
Now that it’s just around the corner, it’s time to shift your mindset from accumulating wealth to working to generate sustainable income.
Smart retirement income planning is intended to help you make the most of your savings, reduce tax liability, and enjoy the freedom that retirement brings.
A solid plan focuses on generating reliable income, providing growth potential, and maintaining flexibility to adapt to life’s changes.
Here are three steps that we believe can help to set you up for a confident retirement:
Step 1: Determine Your Retirement Income Needs
Start by estimating your expenses in retirement. Keep in mind, these expenses will likely change as you adjust to your new lifestyle.
Some costs, like work clothes and commuting expenses, would likely disappear. Others, such as travel, hobbies, or healthcare, might increase.
Taking the time to calculate these changes can give you a clearer picture of how much income you’ll need each month to maintain your desired lifestyle.
Step 2: Examine Your Sources of Retirement Income
Once you know your monthly income needs, identify where that income will come from.
Fixed income sources, like Social Security or pensions, help to provide a foundation. Beyond that, consider other assets, such as:
- Retirement accounts like 401(k)s and IRAs
- Investments outside retirement accounts
- Real estate income
Understanding all your potential income sources can be to creating a thorough plan.
Step 3: Create a Retirement Income Strategy
This is where your retirement plan should become actionable. Some retirees face a gap between fixed income sources and monthly expenses. Bridging that gap can be beneficial.
A tax-efficient withdrawal strategy can potentially help you stretch your savings, reduce taxes, and help you feel confident that your money lasts.
Here are three components to consider:
1️⃣ Required Minimum Distributions (RMDs):
Start by withdrawing your RMDs from tax-deferred accounts, such as traditional IRAs or 401(k)s, once you reach age 73. These withdrawals are mandatory, and we suggest prioritizing them as an initial income source.
2️⃣ Taxable Accounts:
After RMDs, consider receiving dividends or capital gains from taxable investment accounts. If necessary, consider withdrawing the principal from these accounts as well.
3️⃣ Tax-Deferred & Roth Accounts:
Next, turn to your traditional IRA or 401(k) for additional income. Try to avoid withdrawing from Roth accounts unless necessary. Roth accounts can offer tax advantages and can play an important role in your long-term financial legacy.
Retirement Income Planning Is a Team Effort
Retirement isn’t just about having enough money to stop working—it’s about managing your savings with the goal to last throughout your retirement years.
If you’ve spent your career handling finances on your own, now is the perfect time to bring in professional guidance. A Financial Advisor can help you balance growth, income, and flexibility while helping to tailor a plan to your goals.
Partnering with a professional may help you feel confident as you transition into retirement and embark on this exciting new chapter.
Ready to take the next step? Let’s work together to create a retirement income plan that works for you.
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and Flagship Financial Advisors are separate entities. The information in this material is not intended as tax or legal advice. Stratos Wealth Advisors, LLC or Flagship Financial Advisors, does not provide tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.