Living in Retirement
Retirement is an achievement. Get the information you need to help you reach retirement goals and enjoy everything you’ve worked for.
What you'll learn:
You’ve made the transition from saving to living off your savings. Now, you’d probably like to know you’re doing as much as possible to make your money last. That’s where retirement income planning comes in.
An effective retirement income strategy can help you withdraw, spend and invest your savings for reliable cash flow and a potentially better tax outcome. It can also help you grow your nest egg to generate additional income, if you need to.
Here are four steps for creating an effective income strategy, according to the Schwab Center for Financial Research:
Create effective income strategy
StepPlan your spending
Create a financial plan based on your goals, expected spending, and how long you need your money to last.
StepChoose your investments
Build a diversified portfolio that takes into account your desired growth, income, risk and timeline.
StepTap your income sources
Generate a reliable income stream by tapping your entire portfolio in tax smart ways.
StepUpdate your plan
Monitor and adjust your plan and portfolio regularly to make sure your money lasts, regardless of life or market changes.
What to do about required minimum distributions (RMDs)
Once you reach age 70½, the IRS requires you to take from all of your tax-deferred retirement accounts.
This means you’ll need to withdraw a certain amount of your savings each year, or risk owing a 50% IRS penalty.1
The amount you’ll need to take out depends on your tax-deferred retirement account balances and current age.
Here's an example:
Let’s say the RMD for your retirement accounts is $7,000 this year.
If you don’t withdraw $7,000 from the right accounts by April 1 of next year, the IRS could charge you a penalty of up to 50% of the amount you were supposed to withdraw. In this case, your penalty could be as much as $3,500 (50% of $7,000).
Putting an estate plan in place is critical to make sure loved ones can carry out your wishes, if needed. But it doesn’t have to be complicated.
Here are four things you can do to get started:
Take an inventory of your assets and debts
- List the value of your real estate, cars, and other property, and include recent statements from your bank, investment, and brokerage accounts.
- Add your insurance policies, their cash value, and death benefit.
- List all debts, including your mortgage, loans and credit cards.
Put your wishes in writing
- Make a list of your heirs and assets you’d like to pass on to them.
- Name a potential guardian for your children and someone you trust to make financial and medical decisions on your behalf.
- Put your wishes about life-saving medical care in writing.
- Consider running the documents you draft by an estate-planning attorney, to make sure they’re legally sound.
Bring loved ones into the process early
- Let loved ones know your plans and wishes, and where to find important records and documents.
- Make sure they also have an estate plan.
- Consider bringing them along when you meet with your attorney or other advisors.
Meet with an estate-planning attorney
- Estate settlement laws vary by state, so it's best to have an experienced estate-planning attorney prepare your plan.
- They can review your specific needs and explain how to use wills, trusts, powers of attorney, and other legal documents to your advantage.
- They can also help you identify gaps in your plan and draft legal documents.
Common questions about Social Security and health care costs
- When should I start taking Social Security?
- Can I change my mind after starting Social Security benefits?
- Can I keep taking Social Security, if I go back to work?
- How can I estimate future health care costs?
- How can I cover health care costs if I retire before age 65?
What you can do next
Need more information on retirement planning?
- Why should I work with a Financial Consultant?
- How is a Financial Consultant acting in my best interest?
- Will I see all the fees and commissions I’m paying?
- How is my Financial Consultant paid?
- Where can I find my Financial consultant’s credentials?