Developing a Retirement Withdrawal Strategy, Ep #148

Developing a retirement withdrawal strategy requires a different mindset verses the years you spent accumulating your retirement savings.

This is why you need to have a retirement plan in place to help guide you through this transition. Unfortunately, the same plan won’t work for everyone which is why it’s important to understand what type of strategy would work best for you.

On this episode of Financial Symmetry, we highlight the risks and opportunities to consider as you approach the decumulation stage of your life.

What to consider if you are retiring before age 59.5

If you are planning to retire before the age of 59.5 you first need to make sure that you have all your ducks in a row.

Before age 59.5 you won’t be able to access your various retirement accounts without a penalty, so you’ll want to make sure that you have access to money for this time period outside of a traditional retirement account. You could obtain funds from a brokerage account, home equity, rental properties, or an inheritance. Before you retire early, think about which funds you could source without having to take a penalty by dipping into your tax-deferred accounts.

You’ll not only need to know where your money is coming from when retiring early, but you’ll also have to think about health insurance. Obtaining health insurance before you are eligible for Medicare can be quite costly. Many people choose to go with COBRA or the ACA. Make sure you consider the costs of health insurance when creating your retirement plan.

The younger you retire the more susceptible you are to sequence of return risk. Sequence of return risk can lead many people to become conservative with their investments, however, this reaction can lead to increased inflation risk. To consider these two types of risk it is important to have a balanced portfolio

Retirement between the ages of 59.5 and 65

If you are planning to wait until full retirement age at 67 or beyond then you may be funding the early years of retirement all on your own without the help of Social Security. Once you reach the age of 59.5 you can access your retirement accounts without penalty. However, it is important to remember that income from your IRAs, 401Ks, and 403Bs will be taxed when you access them.

Sequence of returns is still a factor this early on in retirement so make sure that your portfolio can weather the storms that the market could bring. Listen in to discover what you should be thinking about 2 years before you apply for Medicare.

Retirement considerations after age 65

Once you reach 65 you can enroll in Medicare and will no longer have to worry about paying for costly medical insurance. This is a good time to start thinking about when you will take Social Security and the tax ramifications. If you are unfamiliar with the Social Security tax bubble check out episode 101 to learn more.

During retirement, your annual tax plan should always be taken into consideration with your overall retirement tax plan to ensure that you save as much as you can over the course of your lifetime.

Retirement strategies don’t always go according to plan

You’ve probably heard of popular retirement strategies like the 4% rule, the guardrails, the bucket strategy, or a systematic withdrawal approach. These strategies are all great on paper but they can often fall apart when life gets in the way.

Instead, we take a flexible approach to retirement planning that is based on your life and your financial plan. We look at the big picture to think about how you can reduce your lifetime tax rate and create a plan that works with your financial goals.

Examine where you are on your retirement journey. Think about your risks and opportunities when creating your retirement plan. Listen to this episode to hear what you need to think about during the different phases of your retirement.

Outline of This Episode

  • [2:40] What to consider if you are retiring before age 59.5
  • [7:30] Considerations for those between the ages of 59.5 and 65
  • [9:49] Retirement strategies don’t always go according to plan
  • [12:10] Retiring between ages 65 and 72
  • [16:39] If you retire in the post-RMD age bracket
  • [22:28] Progress principles

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