Your full retirement has arrived! Let’s take a look at how to transition to living solely on your retirement income and savings. If you’re like many seniors, you may have postponed your full retirement, perhaps by working or consulting part time. Transitioning to a work-free life can be exhilarating yet worrisome, but you have options.
Tally your guaranteed income. You first need to know how much income you’ll receive each month. Social Security benefits are a good start, but hardly enough. Add in any guaranteed income from pensions, annuities, and disability benefits. This is your basic retirement income.
Survey your retirement savings. As long as you’re older than 59½, you can withdraw from your qualified retirement plans penalty-free. If you’ve reached age 70 ½, you must begin taking required minimum distributions from your traditional IRA (but not your Roth!) and employee retirement account, such as your 401(k), 403(b) or 457 plan.1
How quickly should you draw down savings? Required minimum distributions are set by the IRS, based on your estimated life expectancy. You can take out more if you like, but you need to balance current withdrawals with future needs. A common rule of thumb is to withdraw 4% annually from your retirement savings. The withdrawal rate you select will depend on your age and retirement budget.
Transition to your post-retirement lifestyle. Frequently, retirees must adjust their lifestyles to match their resources. You can downsize your home and take other steps to reduce your spending.
Planning is the key to a comfortable retirement. Naturally, the earlier you begin planning your retirement, the more control you’ll have. But whatever your age, Diamond Financial Planning can help you understand your options and show you how to make the most of your resources.