Reaching Retirement: 5 Key Retirement Income Considerations

Elevations Credit Union - Colorado Mountains

You’ve worked hard your whole life anticipating the day you could finally retire. First of all, congratulations if that day has arrived! You’ve spent a lifetime accumulating your retirement assets, and now it’s time to put them to work.

Reaching retirement comes with the realization that you’ll need to carefully manage these assets so that your retirement savings will last. Our CFS* Financial Advisors at Elevations Credit Union are here to help you make sure your retirement plan is in the best shape possible. We’ve shared five considerations in this post to help ensure your retirement years are as fantastic as you’ve imagined they would be.

1. Review your portfolio regularly

Traditional wisdom holds that retirees should value the safety of their principal above all else. For this reason, some people shift their investment portfolio to fixed-income investments, such as bonds and money market accounts as they approach retirement. The problem with this approach is that you’ll effectively lose purchasing power if the return on your investments doesn’t keep up with inflation.

While generally it makes sense for your portfolio to become progressively more conservative as you grow older, it may be wise to consider maintaining at least a portion of your portfolio in growth investments.

2. Spend wisely

Don’t assume that you’ll be able to live on the earnings generated by your investment portfolio and retirement accounts for the rest of your life. At some point, you’ll probably have to start drawing on the principal. But you’ll want to be careful not to spend too much too soon. This can be a great temptation, particularly early in retirement.

A good guideline is to make sure your annual withdrawal rate isn’t greater than 4 to 6 percent of your portfolio. (The appropriate percentage for you will depend on a number of factors, including the length of your payout period and your portfolio’s asset allocation.) Remember that if you whittle away your principal too quickly, you may not be able to earn enough on the remaining principal to carry you through the later years.

3. Understand your retirement plan distribution options

Most pension plans pay benefits in the form of an annuity. If you’re married, you generally must choose between a higher retirement benefit paid over your lifetime or a smaller benefit that continues to your spouse after your death. A financial professional can help you with this difficult but important decision.

Other employer retirement plans like 401(k)s typically don’t pay benefits as annuities; the distribution (and investment) options available to you may be limited. This may be important because if you’re trying to stretch your savings, you’ll want to withdraw money from your retirement accounts as slowly as possible. Doing so will conserve the principal balance and will also give those funds the chance to continue growing tax-deferred during your retirement years.

Consider whether it makes sense to roll your employer retirement account into a traditional IRA, which typically has very flexible withdrawal options. If you decide to work for another employer, you might be able to transfer assets you’ve accumulated to your new employer’s plan, if the new employer offers a retirement plan and allows a rollover.

4. Plan for required distributions

Keep in mind that you must generally begin taking minimum distributions from employer retirement plans and traditional IRAs when you reach age 70½, whether you need them or not. Plan to spend these dollars first in retirement. If you own a Roth IRA, you aren’t required to take any distributions during your lifetime. Your funds can continue to grow tax-deferred, and qualified distributions will be tax-free. Because of these unique tax benefits, it generally makes sense to withdraw funds from a Roth IRA last.

5. Know your Social Security options

You’ll need to decide when to start receiving your Social Security retirement benefits. At normal retirement age (which varies from 66 to 67, depending on the year you were born), you can receive your full Social Security retirement benefit. You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced. Conversely, if you delay retirement, you can increase your Social Security retirement benefit.

The CFS* Financial Advisors here at Elevations Credit Union are always available to help you navigate these important considerations and decisions. Please give us a call at 303-443-4672 x2240 to set up a complimentary, no-obligation appointment with one of them. You’ve spent a lifetime accumulating your retirement assets and now it’s time to put them to work. Let us help you make sure that everything is in place and your retirement plan is functioning as it needs to!

*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. The credit union has contracted with CFS to make non-deposit investment products and services available to credit union members. For specific tax advice please consult a qualified tax professional.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016.
Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Author John Marx

John has been in the financial services industry since 1986 and is currently Elevations VP of Wealth Management, in addition to being a registered Financial Advisor through CUSO Financial Services, L.P. He shares helpful tips on investments, insurance and money management.

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