retirement savings

Everything You Need to Know About Withdrawing Your Retirement Savings

February 10, 2022

February 10, 2022: When you’re getting ready to retire, it’s exciting to see decades of hard work pay off. This is especially true if you’ve seen your investments grow through a 410(k), IRA, or another type of retirement account. It’s important, though, that you plan carefully and withdraw from your accounts strategically. Too many people enjoy retired life for a few years only to realize that they do not have enough savings to continue sustaining their retired lifestyle. How much should you withdraw from savings in retirement, and how can you stretch your savings to last? Consider these four key ideas to ensure your retirement is successful.

Follow the 4% Rule

One of the most popular retirement withdrawal strategies is the so-called 4% rule. Its popularity is largely due to its simplicity. As you may have guessed, the rule dictates that retirees withdraw only 4% of their retirement portfolio’s value per year. This rule is contingent upon several assumptions, though, including the supposition that your portfolio is comprised of 50% bonds and 50% stocks. Of course, this assumption is not a given, meaning that the rule is not ideal for every retiree.

Create a Minimalist Budget

While withdrawing a set amount annually may be an ideal retirement strategy for some people, it may make more sense to focus on controlling your spending. This can help you better identify how much you need to withdraw, too. In order to do so, you should work on crafting a minimalist budget that helps you extend the longevity of your savings. If you can maintain a low cost of living, you’ll be less worried about the consequences of withdrawals from your savings.

Withdraw Funds in Order

If you have invested in multiple retirement accounts, you might be wondering — in what order should I withdraw retirement funds? Withdrawing your savings in a strategic order can help you minimize your tax liability and maximize your assets. Typically, financial advisors indicate that retirees should first withdraw funds from any taxable accounts. Withdrawals should then be made from accounts that are tax-deferred or tax-advantaged. Finally, Roth accounts should be the last source of withdrawal. Following this sequence of withdrawal allows investments to continue growing for the longest period possible while minimizing tax implications.

Supplement Your Savings

Many retired people enjoy life away from work and find the relaxation of retirement very rewarding. Some, though, find that they want a new hobby or occupation in order to fill their newfound free time. It should be noted that many retirees find a way to supplement their savings with additional income from part-time work or profitable hobbies. If you would like to slow down your retirement savings withdrawals, you might be able to do so by integrating another source of income into your retirement strategy.

About 1891 Financial Life

At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.

Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.