Stop Losing Money! Master the Art of Retirement Withdrawals and Supercharge Your Savings!
Stop Losing Money! Master the Art of Retirement Withdrawals and Supercharge Your Savings!
Financial Confidence in Retirement is Critical. Here’s a Guide to Optimizing your Withdrawals in Retirement.
Have you considered the sequence in which you’ll withdraw your retirement income? Making the wrong choices in this regard could potentially result in significant financial losses, potentially amounting to hundreds of thousands of dollars.
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Here are some Optimal Procedures to Drawdown Capital from your retirement accounts.
Consider initiating your retirement withdrawals by tapping into your investment income first. This approach allows your retirement accounts more time to benefit from compounded interest. Jumping directly into withdrawals from your 401(k) or IRA might inadvertently diminish your retirement savings by sacrificing potential years of accrued income.
Whether your portfolio includes mutual funds, a brokerage account, ETFs, stocks, or bonds, it’s important to note that all these assets are taxable. Withdrawals trigger capital gains taxes, and in some cases, certain investments may require you to pay annual taxes on distributions, as seen with certain mutual funds. It’s advisable to consult with a fiduciary investment advisor portfolio manager and your accountant to determine the tax implications specific to your accounts.
Think twice before automatically claiming Social Security benefits at 62.
While it might be tempting to start receiving payments early, doing so means you won’t be securing your maximum entitlement. To truly maximize your Social Security benefits, it’s advisable to continue working until you reach your “full retirement” age.
It’s essential to understand that the benefits you receive at ages 62, 66, or 67 are not your maximum. The peak Social Security retirement benefit becomes available at age 70. Claiming benefits before this age means you’re settling for less than your full entitlement.
Post full retirement age, your benefits increase annually by a certain percentage, determined by specific criteria. To optimize this strategy, consider delaying your claim until age 70. By doing so, you’ll receive the highest possible payments, increasing by 8% each year you wait.
However, it’s crucial to recognize that while this approach can help you secure the highest Social Security benefit, individual circumstances vary. To tailor the optimal plan for your retirement, seek advice from an investment advisor portfolio manager who can guide you on how and when Social Security benefits should integrate into your unique retirement strategy.
Hold off on withdrawing from your 401(k) and IRA until Required Minimum Distributions (RMDs) come into play.
While you become eligible to withdraw from your 401(k) at age 59 1/2, it’s worth considering delaying this action. The law mandates that you initiate Required Minimum Distributions only when you reach the age of 73. This allows your funds additional time to grow, benefiting from compound interest. By strategically postponing withdrawals, you can optimize the growth potential of your money during this period.
Before tapping into your Roth IRA, explore alternative options first.
Delay withdrawing money from your Roth IRA for as long as you can. The upfront taxes you have paid on contributions early in your life, mean that withdrawals from your Roth IRA won’t be considered taxable income.
Additionally, your Roth IRA will continue to experience tax-free growth even as you draw from your other accounts. Because a Roth IRA contains after-tax funds and the IRS doesn’t require additional taxation, you are not obligated to take Required Minimum Distributions. This unique characteristic allows your Roth IRA to keep growing untouched for as long as you refrain from accessing it.
Planning the optimal sequence for withdrawing money from your retirement accounts is a unique process for each individual.
To navigate this complexity, we strongly recommend consulting with a investment advisor portfolio manager.
According to a study by Voya Financial, 79% of individuals utilizing an advisor feel confident in pursuing their retirement goals. The research also indicates that 59% of these individuals have calculated their retirement needs, while 52% have established a formal retirement investment plan.
Selecting an investment advisor portfolio manager is a pivotal decision that can profoundly impact your life. While they can’t foresee the future, a skilled investment advisor portfolio manager can assist you in planning for it.
According to a 2020 Northwestern Mutual study, a substantial 71% of U.S. adults acknowledge the need for improvement in their financial planning. Surprisingly, only 29% of Americans actually engage the services of an investment advisor portfolio manager. The decision to work with an investment advisor is deeply personal, and it’s important to note that advisors are bound by law from guaranteeing specific returns. Nevertheless, research indicates that individuals who collaborate with investment advisor portfolio managers tend to feel more secure about their financial situation and may potentially have around 15% more funds available for retirement.
A recent study conducted by Vanguard revealed compelling insights. On average, a notional $500,000 investment managed by an investment advisor portfolio manager could grow to over $3.4 million in 25 years. In contrast, the expected value of a self-managed portfolio would be $1.69 million, a significant 50% less. To break it down further, an portfolio manager-managed portfolio demonstrates an average annualized growth of 8% over a 25-year period, whereas a self-managed portfolio achieves only 5%. These findings underscore the potential benefits of entrusting your investments to a qualified investment advisor and portfolio manager.
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We’ve assisted our clients through every stage of life. Even when you’re not aware that something might impact your financial future, it likely will to some extent. Engaging in a conversation with your investment advisor about any financial changes is an excellent approach to keeping your financial goals in focus.
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For more information or to connect with me, you can reach out via email at macekadmin@iaprivatewealth.ca or get to know me better by exploring my engaging video content on YouTube https://www.youtube.com/@joemacek.
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Don’t hesitate to reach out today at 1–888–324–4259 to discover more about how we can help you achieve your investment milestones.
Joe A. Macek, FMA, CIM, DMS, FCSI
Investment Advisor, Portfolio Manager
iA Private Wealth | iA Private Wealth USA
Toll Free North America: 1–888–324–4259
Email: macekadmin@iaprivatewealth.ca
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